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.
Sign up for Kiplinger’s Free E-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
-
Trump's Immigration Policies and the Price of Home Healthcare: First 100 DaysPresident Trump's immigration policies may wallop your pocketbook if you rely on a home healthcare aide.
-
Stock Market Today: Stocks Extend a Quiet Winning StreakThe S&P 500 Index could actually close April with a monthly gain, which would be an extraordinary sign of market resilience.
-
Don't Veer Off Course at the First Sign of a Squall in the MarketsWhen markets go nuts and investor sentiment drops, you can keep your sanity by trusting in and sticking with your long-term plan.
-
How Business Owners Can Prepare for a Terminal DiagnosisThe most important thing is readiness, whether the owner faces a life-changing diagnosis or an employee does.
-
Advisers, Take Note: How 2025 Social Security Changes May Impact Your ClientsWhat financial advisers might need to know to help their clients navigate Social Security in 2025.
-
Social Security Is Taxable, But There Are WorkaroundsIf you're strategic about your retirement account withdrawals, you can potentially minimize the taxes you'll pay on your Social Security benefits.
-
Serious Medical Diagnosis? Four Financial Steps to TakeA serious medical diagnosis calls for updates of your financial, health care and estate plans as well as open conversations with those who'll fulfill your wishes.
-
To Stay on Track for Retirement, Consider Doing ThisWriting down your retirement and income plan in an investment policy statement can help you resist letting a bear market upend your retirement.
-
How to Make Changing Interest Rates Work for Your RetirementHigher (or lower) rates can be painful in some ways and helpful in others. The key is being prepared to take advantage of the situation.
-
Within Five Years of Retirement? Five Things to Do NowIf you're retiring in the next five years, your to-do list should contain some financial planning and, according to current retirees, a few life goals, too.
