If you were to ask American workers today about their current financial situation, their responses would likely result in opposing stories. While those who are already doing well financially — investors, savers and homeowners — may have reaped the benefits of recent market gains, those who have been struggling are bearing the brunt of the impact of persistent inflation and higher interest rates.
We’re facing an alarming situation where the gap in the financial standing of American workers is widening. As a Certified Financial Planner™ professional and the director of a financial wellness think tank, I believe that employers need to intervene.
First, some good news for finances
Taking a step back, it’s important to acknowledge the improvements in the financial health of many Americans and the encouraging signs for closing the financial divide. Contributions to retirement savings have reached all-time highs. An analysis from Fidelity found that more than a third of workers increased their retirement savings contribution rate last year — with 78% contributing enough to receive their full company match and a record amount of 401(k) contributions in the first quarter of 2024. And with market gains of 26% last year, investors and savers saw healthy growth of their 401(k) balances and other investing accounts.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
A recent report from Financial Finesse, “Workplace Financial Wellness in America,” also showed encouraging signs, revealing that employees were 69% more likely to be financially secure than the previous year.
Now, the bad news
At the same time, many Americans have been left behind by the wave of economic gains. They’ve continued to struggle financially as a result of how inflation has driven up the cost of living and forced many to deplete their savings just to make ends meet.
The statistics alone tell a distressing story: 78% of Americans are living paycheck to paycheck, 27% have no savings for emergencies; credit card debt is at an all-time high; and a record number of workers have taken hardship withdrawals from their 401(k) accounts. The same report from Financial Finesse revealed the share of employees reporting unmanageable levels of financial stress increased 16%.
Where financial coaching comes in
So how can we make it possible for Americans to improve their financial situation when this divide exists? While there is no one-size-fits-all solution, financial coaching can be instrumental in helping workers improve their financial health.
In an analysis of employees who worked with a financial coach, more than half who initially reported having high or overwhelming levels of financial stress reported a significant reduction in their stress levels after working with a financial coach. In fact, financial coaching lowered stress levels for employees on both ends of the financial spectrum. Considering money is a top source of stress for American adults, employers cannot ignore the impact this stress is having on their employees.
Workplace financial coaching can help address the evolving financial needs of employees and empower them to make informed decisions to improve their financial health. In today’s constantly changing economic environment, where the financial snapshot of one worker may be completely different from the co-worker sitting next to them, employers can provide them with a service that benefits both.
We cannot continue down the current path where only those who are currently financially stable are seeing their wealth grow. Democratizing access to expert guidance and information can help move the needle by inspiring changes in people’s financial behavior through workplace financial coaching. Now, it’s up to employers to prioritize investing in benefits that will help bridge the financial divide.
Related Content
- Workplace Financial Coaching Has Become Ever More Important
- Beyond Financial Literacy: What You Need to Win With Your Money
- Financial Planning for Your Future in the Game of Life
- How to Get Your Money's Worth From Your Financial Adviser
- Want to Hire a Remote Financial Adviser? What to Consider
-
I Just Paid Off My Car. Can I Downgrade My Car Insurance Now?You've gotten rid of that car payment. Can you save even more by downgrading your car insurance? Here's what to consider.
-
Is Wireless Home Internet Right for You?T-Mobile’s 5G home internet offers flexibility, simplicity and potential savings but is it a replacement for cable or fiber?
-
Are You Retired? Here's How to Drop the Guilt and Spend Your Nest EggTransitioning from a lifetime of diligent saving to enjoying your wealth in retirement tends to be riddled with guilt, but it doesn't have to be that way.
-
Government Shutdown Freezes National Flood Insurance Program: What Homeowners and Buyers Need to KnowFEMA's National Flood Insurance Program is unavailable for new customers, increased coverage or renewals during the government shutdown.
-
Separating the Pros From the Pretenders: This Is How to Tell if You Have a Great AdviserDo you leave meetings with your financial adviser feeling as though you've been bulldozed into decisions or you're unsure of what you're paying for?
-
Five Downsides of Dividend Investing for Retirees, From a Financial PlannerCan you rely on dividend-paying stocks for retirement income? You'd have to be extremely wealthy — and even then, the downsides could be considerable.
-
I'm a CPA: Control These Three Levers to Keep Your Retirement on TrackThink of investing in terms of time, savings and risk. By carefully monitoring all three, you'll keep your retirement plans heading in the right direction.
-
Debunking Three Myths About Defined Outcome ETFs (aka Buffered ETFs)Defined outcome ETFs offer a middle ground between traditional equity and fixed-income investments, helping provide downside protection and upside participation.
-
This Is Why Judge Judy Says Details Are Important in Contracts: This Contract Had HolesA couple's disastrous experience with reclaimed wood flooring led to safety hazards and a lesson in the critical importance of detailed contracts.
-
A Lesson From the School of Rock (and a Financial Adviser) as the Markets Go Around and AroundIt's hard to hold your nerve during a downturn, but next time the markets take a tumble, remember this quick rock 'n' roll tutorial and aim to stay invested.
