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Guide to Financial Wellness

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Very interesting study on US financial wellness examining the current situation (47% of the US population cannot meet unexpected expenses as low as USD 400!), the causes of the problem (time lag between when Americans earn their income and when they cash it in), and tentative solutions (includes earned wage access solutions & savings to build up rainy day funds).

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Guide to Financial Wellness

  1. 1. By Andy Bandyopadhyay, Ph.D. HEAD OF SCIENCE AT EVEN.COM A Guide to Financial Wellness The Employer’s Handbook for Understanding On-Demand Pay and Financial Wellness Benefits. BY ANDY BANDYOPADHYAY, PH.D. HEAD OF SCIENCE AT EVEN.COM
  2. 2. 2Chapter 01: Americans are stuck Over the past 30 years, income has stagnated for 90% of Americans. Healthcare costs have gone up by 400%, and the price of housing has increased by 200%. Americans are moving outside cities to marginally more affordable areas, taking on greater commute expenses, and grappling with childcare costs 1 which now often exceed college tuition 2 . Americans at all income levels live paycheck to paycheck, saving nothing for next week, let alone for their future. The research summarized in this book is clear: despite prevailing wisdom, paying people more, or paying them on-demand, are band-aids that will not solve the underlying problem. The best employers differentiate themselves, improve their bottom lines, and help their people by giving them a holistic set of tools designed to solve the underlying problem: the many factors that contribute to how difficult it is to save money. www.even.com A Guide to Financial Wellness © 2019 Even Responsible Finance, Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy or recording, or any information and retrieval system, without permission in writing from Even Responsible Finance, Inc Author Andy Bandyopadhyay, Ph.D. Editors Jon Schlossberg, Juli Fischer, Jane Leibrock, Megan Boone, Tiffany Frye
  3. 3. 3Chapter 01: Americans are stuck Over the past 30 years, income has stagnated for 90% of Americans. Healthcare costs have gone up by 400%, and the price of housing has increased by 200%. Americans are moving outside cities to marginally more affordable areas, taking on greater commute expenses, and grappling with childcare costs 1 which now often exceed college tuition 2 . Foreword p04 Americans are stuck p06 Starved for savings p17 Bringing stress to work p23 Progress starts with savings p32 Five secrets to success p38 Next Steps p43 01 02 03 04 05 + → Contents
  4. 4. Bryan is a 32-year-old general manager of a local Walmart. He graduated with his master’s degree in chemical engineering at the height of the recession, when there weren’t many good-paying jobs at all—let alone in chemistry. So he gladly took the position at Walmart. “I really like my job,” Bryan says without hesitation. “The pace, the challenges, the people.” Walmart feels grateful to have him: Bryan’s store is one of the best performers in its region.  He makes good money, but the rent where Bryan lives with his wife and young daughter has doubled in the past ten years. The loans he took out (for the degree he’s not using) are crippling. And after paying the monthly daycare bill—he can’t believe how expensive it is, but someone needs to watch his kid, you know?—Bryan and his family are living paycheck to paycheck. Bryan is an incredibly responsible manager, father, and husband. He tries to save money. But his parents, also chemical engineers, never really taught him how to manage his finances, and the public school system cut home economics long ago. The financial literacy videos he’s watched on YouTube seem simple enough, but they don’t help him save when there’s not enough money and too much month.  You wouldn’t know it by talking to him, but Bryan and his family are struggling. He feels it the most when he can’t afford to put gas in Foreword
  5. 5. his truck, which, cruelly, makes it hard to get to work and earn the money to pay for gas. Or when his wife calls, exasperated in line at the supermarket, phone in one hand and toddler in the other, because her card was just declined at the register. Or when his daughter needs medicine for yet another something she picked up at daycare, and Bryan has to pick between caring for his child or paying bills. “I think it’s time to make a resume,” Bryan tells his wife. “We just can’t keep struggling like this.” Bryan’s situation is not unusual. It is the new normal. The majority of Americans live paycheck to paycheck, struggling to make ends meet. And the stress of that struggle does not magically disappear when people leave their home and enter your workplace. They bring their stress with them, affecting their attitude, their performance, and ultimately, their desire to stay and grow with your company.  This short book summarizes the research that explains why so many people like Bryan are struggling, the measurable impact it’s having on your business, and what you should consider when starting a project to help. I hope you find it useful. Jon Schlossberg FOUNDER & CEO EVEN
  6. 6. Americans are stuck 01
  7. 7. 7Chapter 01: Americans are stuck Rising costs, overwhelming debt, and nowhere to turn: The vast majority of Americans can no longer afford a good life.
  8. 8. 8Chapter 01: Americans are stuck Over the past 30 years, income has stagnated for 90% of Americans. Healthcare costs have gone up by 400%, and the price of housing has increased by 200%. Americans are moving outside cities to marginally more affordable areas, taking on greater commute expenses, and grappling with childcare costs1 which now sometimes exceed college tuition.2 1X 0 2X 3X 4X 5X 1980 1990 2000 2010 YEAR BASE PERIOD: 1982-84 = 1X COST INCREASE Transportation Housing Medical Food Costs are soaring, and Americans can’t keep up Between 1980 and 2018, it’s become increasingly difficult for people afford life’s basic necessities. Source: Consumer Price Index-All Urban Consumers (Current Series), Bureau of Labor Statistics, Retrieved for 1979-2018 from https://data.bls.gov/PDQWeb/cu on August 22, 2019
  9. 9. 9Chapter 01: Americans are stuck Conventional wisdom tells young people: Go to college, and you’ll succeed. Yet between 1989 and 2016, the cost of attending college has doubled—even after accounting for inflation.3 Meanwhile, the economic returns on those degrees have flattened,4 leaving young people stuck paying back debt—with interest—on degrees that simply aren’t as valuable as the ones gained by past generations. Source: “How Many Hours Would It Take You to Work Off Today’s College Tuition?” The New Republic, October 6, 2015 WEEKS OF WORK 40 hours per week at minimum wage 2015 1979 55.72 weeks 9.6 weeks 0 60 Is it still possible to “work your way through college?” In 1979, students could earn enough to pay for a year of college during a single summer. Now, it would take over a year, leaving no time for actual classes.
  10. 10. 10Chapter 01: Americans are stuck This is especially true for students who never finished: Between 2014 and 2016 alone, 3.9 million college students with federal student loan debt dropped out. Those who take out loans, but never finish their degree, are three times more likely to default on their loan than students who graduate.5 And this type of default precludes people from getting more financial aid to resume classes later in life.6  As of 2018, Americans are carrying $13.5 trillion in debt. Student loans account for $1.4 trillion of that debt, an increase of $64 billion from 2017. Mortgage debt is at $9.1 trillion, and the average household has $8,284 in credit card debt. Total consumer debt has been increasing for 17 consecutive quarters.8 As higher education gets more expensive, the actual economic returns to a university degree are about flat. People who are more educated make more money than people with less education, but overall, most educational groups are just treading water.”7   – THE ATLANTIC “
  11. 11. 11Chapter 01: Americans are stuck The products that should be helping are making things much worse As Americans struggle to get by, they’re being offered dozens of products and services that promise relief. But instead of helping people make progress, financial institutions are digging deeper holes for their customers to fall into—all while pocketing billions of dollars per year for their efforts.9 Hard-earned wages that could be growing savings accounts are being wasted, going towards banks’ profits. In 2017 alone, Americans paid over $34.3 billion in overdraft fees.10 As consumers become wiser to these punitive practices, banks adjust accordingly. Customers hit with overdraft fees began to work harder at avoiding them; to compensate, banks raised the average overdraft penalty from $20 to $30.11 A new breed of fees has also emerged, designed to siphon money from customers at every turn. Fees for low balances, ATM withdrawals, and balance checks penalize already-struggling people for simply trying to utilize their own money. 
  12. 12. 12Chapter 01: Americans are stuck The people who need help the most are the ones susceptible to the most harmful “services.” The $9 billion payday loan industry is predicated on taking money from people at the precise moment they’re most vulnerable. Payday loan stores—which outnumber McDonalds and Burger Kings combined12 in the United States—offer short-term loans that can have fees that are equivalent to 400% APR. When compared with APRs for traditional personal loans, which range from 6% to 36%,13 the rates on payday loans fall squarely into predatory territory.  Overdraft fees are at record highs Source: Amanda Dixon, “Survey: ATM fees hit a record high for the 14th year in a row.” Bankrate, October 10, 2018 30 $35 25 20 1998 2003 20132008 2018 $33.23 Average overdraft fee In 1998, the average overdraft fee was $21.57. Today, it tops $33.23.
  13. 13. 13Chapter 01: Americans are stuck Payday loans are profitable because the providers trap customers in cycles of debt. The Center for Responsible Lending found that only 1% of these loans are given to borrowers who can pay their loan off within the allotted two weeks. According to the Consumer Finance Protection Bureau, 80% of borrowers can’t repay their loan within two weeks,15 at which point the fees soar to the equivalent of a 521% interest rate16 —and keep going up every time a new due date comes and goes. When all is said and done, the average consumer pays $1,105 to borrow just $325.17 “Payday lenders target millions of low-income consumers who have little to no savings and live paycheck to paycheck.”14 – MOTHER JONES
  14. 14. 14Chapter 01: Americans are stuck Over the past 30 years, income has stagnated for 90% of Americans. Healthcare costs have gone up by 400%, and the price of housing has increased by 200%. Americans are moving outside cities to marginally more affordable areas, taking on greater commute expenses, and grappling with childcare costs 1 which now often exceed college tuition 2 . “The average payday loan customer spends $1,105 to borrow just $325.” Source: Lawrence Korb, Jenna Churchman, “Defend All From Payday Loans,” Mother Jones, July 19, 2006
  15. 15. 15Chapter 01: Americans are stuckHow payday loans work Payday loans might seem like a simple solution to an everyday cash flow problem. But how well are they understood? Here’s a deep dive into how they work—and how hazardous they can be. Fill out a registration form at the payday loan store, providing your ID, paystub, and bank account number. Loan amounts range from $50 to $1,000, depending on local laws. You’ll receive cash on the spot. Full payment is due on your next payday (usually around two weeks). Post-date a personal check coinciding with your next paycheck, or give the payday lender permission to electronically debit your bank account. The loan amount is recouped either via the post-dated check or direct debit—plus a flat fee of $15 – $20 per every $100 borrowed. Step 1: Get the loan Step 2: Pay the loan back 1 1 2 2 3 ! When calculated using the same APR model used for credit cards, mortgages, and auto loans, payday loan interest ranges from  391% to more than 521%.
  16. 16. 16Chapter 01: Americans are stuck $431.25 64.69 $431.25 Loan 1 total New Loan fee Total 431.25 x 15% fee EXAMPLE If you miss your two-week repayment deadline, you can “roll over” the loan, adding new finance charges to your existing debt. This happens with over 80% of loans. But what if you can’t make it to step 2? The average payday loan is $375. If your loan has the lowest finance charge available ($15 per $100 borrowed), you’d pay a fee of $56.25 on the principal of $375, for a total loan amount of $431.25. If you can’t pay on time and have to “roll over” the loan, the new amount would be $495.94. How? Because the “new loan” amount is the $431.25, plus a brand new round of interest that totals $64.69, coming to a total of $495.94. This is how a $375 loan becomes nearly $500 in less than a month. Loan 2 $375.00 56.25 $431.25 Loan 1 amount Loan fee Total 375.00 x 15% fee Loan 1 New total $495.94 How payday loans work Source: “How Do Payday Loans Work?” InCharge Institute of America, Accessed August 20, 2019
  17. 17. Starved for savings 02 Starved for savings 02
  18. 18. 18Chapter 02: Starved for savings Problem: We’re asking people who can’t save for next month, “Why aren’t you saving for 30 years from now?”
  19. 19. 19Chapter 02: Starved for savings Between declining incomes, rising costs, and profit-hungry financial institutions, Americans simply can’t save money. In the 1980s, the saving rate for the bottom 90% of earners exceeded 10%. After 2011, that dropped to around 2%.18 Another study found that in 2018, 58% of Americans had less than $1,000 in savings; 32% had nothing saved at all.19 This isn’t about budgeting Despite what some “experts” would have us think, the problem isn’t as simple as unchecked spending and frivolous lifestyles. So-called “unnecessary spending” on things like lattes and avocado toast are a popular scapegoat for Americans’ dwindling savings accounts. This narrative is pervasive because it’s visible, convenient, and less uncomfortable than the truth.20 The reality is, savings rates are flagging despite Americans’ best efforts. U.S. Financial Diaries’ Savings Horizons research shows that people are saving money—but it gets wiped out over and over again.21 Income fluctuations and unforeseen expenses cause people to continually dip into their savings, depleting what’s there, and forcing them to start all over again.
  20. 20. 20Chapter 02: Starved for savings “An income or expense shock can, and does, push consumers like this into the red when they have to dip into their minimal short-term savings to meet an immediate need.”22 – THE ASPEN INSTITUTE If people can’t save money, they can’t build long- term financial stability Multiple research bodies such as The Aspen Institute and the Financial Health Network have identified having reliable short-term savings as the most important precursor to long-term financial stability. But unreliable short-term savings undercuts long-term progress. One stark example of this is the 27% of employees who have withdrawn retirement funds to pay for unforeseen expenses or medical bills— plus the 49% who haven’t yet, but anticipate needing to in the future.23 Workers are so strapped that 18% of workers have cut back on their 401(k) contributions in the past year, while 38% don’t participate in plans at all.24
  21. 21. 21Chapter 02: Starved for savings “On average, households say most of their accounts will be spent down in the shortest time horizons: 73% of accounts are used for funds to be spent within six months and 84% of accounts are for funds to be spent in less than a year.”25 – U.S. FINANCIAL DIARIES Americans’ savings account balances simply don’t reflect how hard they’ve been trying. The median household’s end-of-year savings balance was one third of the total amount deposited throughout the year. Less than 10% of savings account balances are intended for use beyond three years in the future. Americans’ savings accounts now resemble checking accounts: They’re used frequently, with multiple deposits and withdrawals each month.26
  22. 22. 22Chapter 01: Americans are stuck Over the past 30 years, income has stagnated for 90% of Americans. Healthcare costs have gone up by 400%, and the price of housing has increased by 200%. Americans are moving outside cities to marginally more affordable areas, taking on greater commute expenses, and grappling with childcare costs 1 which now often exceed college tuition 2 . “78% of Americans feel stress over retiring comfortably, while 21% have no retirement savings at all.” Source: “Planning & Progress Study 2018,” Northwestern Mutual Studies & Research, 2018
  23. 23. Bringing stress to work 03
  24. 24. 24Chapter 03: Bringing stress to work Your employees are getting sick, losing focus, and missing shifts because they’re consumed by financial stress.
  25. 25. 25Chapter 03: Bringing stress to work If Americans are struggling to save enough money to handle short- term problems, they’re unable to devote any resources—financial or cognitive—to planning for the long term. And this leads to debilitating stress. “If people can’t cover a very small, unexpected expense, how can we expect them to save for retirement?”27 – ANGIE CHEN, CENTER FOR RETIREMENT RESEARCH AT BOSTON COLLEGE Northwestern Mutual’s 2018 Planning & Progress study reports that 78% of Americans feel stress over retiring comfortably, while 21% have no retirement savings at all.28 The same study found that money is the top cause of stress—a finding that’s echoed by the American Psychological Association, which reports that money causes more stress than work, health, or relationships. Similarly, PwC’s Employee Financial Wellness Survey found that 67% of employees feel stressed about finances.29
  26. 26. 26Chapter 03: Bringing stress to work All this stress is associated with increased migraines30 and other physical pain,31 insomnia,32 and depression.33 Financial stress causes declines in cognitive abilities,34 and can cause household instability that impairs the development of young children.35 And according to the APA, it’s only getting worse: Between 2017 and 2018, average levels of anxiety jumped by five points, with the greatest increases found in anxiety around paying bills.36 Employee financial stress is bad—and getting worse Percentage of employees who say finances are their #1 stressor in recent years. Employees’ answers to “which of the following causes you the most stress?” 45% 46% 40% 59% 2016 2017 2018 2019 0 60 30 Source: “PwC’s 8th annual Employee Financial Wellness Survey,” PwC US, April 24, 2019 10% Health concerns 4% Other 59% Financial or money matters/ challenges 15% My job 12% Relationships
  27. 27. 27Chapter 03: Bringing stress to work “But is it really my employees?” Nearly 55% of Americans are living paycheck to paycheck.37 But it’s not just low earners—the debilitating stress caused by this affects people up and down the income ladder, in all areas of the economy.     That means it’s impacting people who work for you, from hourly staffers to salaried employees. Of families making $150,000 per year or more, 25% are living paycheck to paycheck. The number increases to roughly 33% for families earning between $50,000 and $100,000. And of families learning less than $50,000, one half are living paycheck to paycheck.38 $100k+$50-100k % % % ANNUAL INCOME % LIVING PAYCHECK TO PAYCHECK >$50k 2550 33 A surprising number of high earners live paycheck to paycheck Percentage of families living paycheck to paycheck based on total earnings Source: Ted Knutson, “Nielsen: Even Many High Earners Live Paycheck To Paycheck,” Financial Advisor Magazine, August 6, 2015

  28. 28. “44% of Americans would rather talk about death, politics, or religion than personal finances.” Source: Ingrid M. Paulin, Wendy De La Rosa, “Why Is It So Hard to Talk about Money?,” Scientific American, March 22, 2018
  29. 29. 29Chapter 03: Bringing stress to work “If your finances cause you stress and anxiety, it’s natural to want to keep this to yourself because you might feel embarrassed or ashamed.”39 – THE NEW YORK TIMES This is a problem that affects nearly the entire American workforce. Meanwhile, study after study shows that Americans aggressively avoid talking about money. Wells Fargo found that 44% of Americans would rather talk about death, politics, or religion than personal finances.40 A whopping 43% of Americans don’t know how much money their spouse makes.41 One in five doesn’t even talk about money at home, period.42 Is it any wonder employers are in the dark about their employees’ struggles? All this stress is bad for business In a recent PwC survey, 35% of employees report being distracted by finances while at work; 49% of those employees admitted spending three or more hours each week dealing with personal finances at work.43 Another PwC survey showed 12% of financially stressed employees missing work occasionally due to financial stress, and 31% saying their productivity has been affected.44
  30. 30. 30Chapter 03: Bringing stress to work Employers report that the problem could be even worse. In a survey conducted by the International Foundation of Employee Benefit Plans, 60% of employers report that financial stress affects their employees’ ability to focus, and 34% report absenteeism and tardiness.45 A study published in the Journal of Financial Counseling and Planning found that financially stressed employees are less likely to be productive, and that stress as a reason for absenteeism has increased over 300% since 1995.46 Employee financial stress has a dramatic effect on business Absenteeism → 2x more likely to miss work due to financial issues Engagement Productivity → → 5x more likely to be distracted by finances at work 3x more likely to spend 5+ hours at work dealing with finances Source: Kent Allison, “Employee Financial Wellness Survey: 2017 Results,” PwC, April 2017   For an employer with 10,000 workers, that adds up to 3,000 distracted employees, and 1,380 workers spending more than three hours per week dealing with financial stress. According to PwC, this
  31. 31. 31Chapter 03: Bringing stress to work can mean losses of up to $3.3M per year. And that doesn’t even include the 12% of employees who admit missing work from time to time—PwC estimates that could cost as much as another $166,000 per year for an employer of 10,000.47
  32. 32. 04 Progress starts with savings
  33. 33. 33Chapter 04: Progress starts with savings Employees can’t become financially well until they can build savings as a foundation for further progress.
  34. 34. 34Chapter 04: Progress starts with savings Positive cash flow is the most fundamental piece of short-term financial stability because when income exceeds needs, consumers have money left over to build savings cushions or invest in wealth- building activities.”48 – ASPEN INSTITUTE “ The research is clear: Employees don’t have enough savings to keep themselves afloat. They’re living paycheck to paycheck, embroiled in day-to-day battles to pay bills and handle emergencies. They’re bringing that stress to work, and it’s hurting bottom lines at businesses around the country. The key to putting employees on the track to financial wellness—thus reducing their financial stress and its effects on business—is to help them save money. The U.S. Financial Diaries found that Americans are withdrawing their savings too much for it to be useful for the future. In addition, authors and researchers Sendhil Mullainathan and Eldar Shafir emphasize the importance of short-term savings for financial wellness in their book Scarcity. Employees need sufficient savings to cover cash flow problems caused by income fluctuations.
  35. 35. 35Chapter 04: Progress starts with savings But as numerous data points tell us, saving is easier said than done. Employees need more than just an instrument to save. They need solutions that enable and maximize savings, while simultaneously addressing the reasons saving is so difficult—as well as the reasons savings accounts get plundered in the first place. A product will be successful if it helps employees save money more successfully than they would on their own. First, employees need to get on stable ground with a healthy and inexpensive solution to cash flow problems. Then they need features to help them keep track of bills, and spend within their means—which means avoiding lost wages due to penalties and fees. This leads to positive cash flow: a point at which income exceeds expenses, allowing savings to grow to the point where they can absorb a cash flow problem without being decimated. Over time, savings balances continue to grow, which is an integral part of making progress towards financial health. ProgressSavingsCash flow
  36. 36. 36Chapter 04: Progress starts with savings This is backed up by data from the Financial Health Network (formerly CFSI) which has done extensive research on what it means to be financially well: Borrowing With a lower-cost way to solve cash flow problems, such as on-demand pay, employees can move towards building emergency savings for future use. Spending Tools to help people spend within their means—while still getting bills paid on time— make saving money possible. Planning When employees have a clear picture of money coming in, as well as what’s needed for bills, surprise cash flow problems become less frequent. Saving When all the previous pieces are in place, employees can think ahead towards long- term planning and saving. Ultimately though, only so much can be done in a world where expenses outweigh earnings. Another mark of a successful product is the presence of forward-thinking plans to help employees not only manage their savings in the face of expenses, but to also help lower those expenses by deploying innovative business strategies, partnerships, and design.
  37. 37. 37 Over the past 30 years, income has stagnated for 90% of Americans. Healthcare costs have gone up by 400%, and the price of housing has increased by 200%. Americans are moving outside cities to marginally more affordable areas, taking on greater commute expenses, and grappling with childcare costs 1 which now often exceed college tuition 2 . Chapter 04: Progress starts with savings Affordable for the short term; insufficient for the long term When someone is living paycheck to paycheck, cash flow emergencies can be a “normal” part of everyday life. In order to get a bill paid on time, or put gas in the car, people need to get cash somehow. One way to get cash is with expensive and predatory payday loans. A more affordable alternative is “on-demand pay,” otherwise known as earned wage access (EWA). While on-demand pay can be an affordable way for employees to get the cash they need in a pinch, it is not a long-term solution. By itself, on-demand pay fails to address the underlying problems of why employees need to get cash in the first place: a lack of savings. A healthier solution for employees is one that provides on-demand pay when they need it—and also helps move them into a situation where they no longer need it. In fact, offering on-demand pay by itself may do more harm than good, because on-demand pay suffers from the same problem as payday loans: Once payday comes, employees often don’t have enough money left for the coming week, and must take their pay early again. Solutions that only offer on-demand pay—but don’t address the reasons people don’t have savings—can create a cyclical dependency for employees to take their wages early, while paying fees for the privilege. On-demand pay
  38. 38. 05 Five secrets to success
  39. 39. 39Chapter 05: Five secrets to success Most tools currently available to your employees aren’t helping—and may actually be holding them back.
  40. 40. 40Chapter 05: Five secrets to success The existing tools for getting unstuck aren’t effective Nonessential → Immediate When employees are in crisis, a plan that helps their future self— instead of their current in-crisis self—is nonessential. An employee can’t think about increasing their 401(k) contribution when their immediate concern is whether there’s enough gas in the car to get to work and keep their job. NONESSENTIAL EXAMPLES: 401(k) programs with auto-enrollment, HSA/ FSA, financial literacy programs Complex → Simple Financially stressed employees are already dealing with high cognitive load and depleted resources; in this state, an overly complex solution is not useful. Most of the tools available take precious time and energy to learn, which reduces not only effectiveness but adoption in the first place. If a solution breaks down the complexities of personal finances and presents them NONESSENTIAL COMPLEX DEMOTIVATING SCATTEREDSTAGNATING
  41. 41. 41Chapter 05: Five secrets to success in a simple, easy-to-understand way, employees can make more progress. COMPLEX EXAMPLES: savings programs, financial planning assistance programs Demotivating → Personalized Tools meant to help employees improve their situation often have the opposite effect due to their demotivating design. When a tool offers negative feedback or unrealistic advice—like telling a user that they exceeded their monthly budget by spending too much on medicine for their child—users will abandon the tool and become far more likely to develop a psychological condition called learned helplessness. A more successful approach will use personalized, motivating design that uses positive reinforcement to help employees develop learned optimism, significantly improving the likelihood of making sustained progress. DEMOTIVATING EXAMPLES: traditional budgeting programs, consumer finance apps Scattered → Centralized Employees’ financial lives are complicated: Loans, multiple checking accounts, pay cards, credit cards, and multiple sources of income.
  42. 42. 42Chapter 05: Five secrets to success Methods of interacting with personal finances—or even getting information about them—are incredibly scattered. A solution that gives employees a centralized place to manage finances will increase the chances of making progress, simply because it’s more convenient.  SCATTERED EXAMPLES: offering different tools for scheduling, budgeting, saving, retirement planning, each from a different vendor and accessed in a different place Stagnating → Healthy Many solution providers profit when their customer is stagnating— when people only need their service because they are stuck and cannot save money. This misaligns the relationship between the provider and their customer: The provider has no interest in helping the customer succeed at saving money, because then the customer won’t need to pay for the solution anymore. A healthy approach aligns the solution provider’s goals with the individual’s such that the provider makes more money when the customer saves money. This way, the provider is motivated to actually help people save.  STAGNATING EXAMPLES: on-demand pay providers, payday lenders, credit cards
  43. 43. + Next steps
  44. 44. 44 Best practices for organizations looking to improve their employees’ financial wellness Next steps
  45. 45. 45Next steps The most successful organizations are run by leaders who realize their most important asset is their people. These employers differentiate themselves by giving employees something that impacts them more than higher wages alone: tools for moving forward. The first step is to redefine your benefits strategy. Yes, you’re offering financial tools—but are they the right ones? If the tools available are overly complex, hard to manage, or simply not giving employees what they need at the time they need it, then they’re effectively useless. Your hard-working employees are trying to make ends meet. They’re drowning in debt, and reaching for services that claim to be a life raft, when in reality they’re just anchors in disguise. The financial institutions that should be helping are taking billions of the wages you’re paying out—annually—in the form of payday loans, overdraft fees, and credit card interest. It’s institutional wage theft. But employers have the power to step in. A holistic financial wellness program can address all these problems. It’s not just about higher wages, just like it’s not about making a budget. Before employees can plan for their futures by participating in things like 401(k) programs, they need to address today’s needs: getting bills paid, and building their savings. Employees need access to healthier solutions that don’t dig their
  46. 46. 46Next steps holes even deeper. They need solutions that turn their paychecks into progress. Only then will your employees leave their financial stress behind, and bring their best selves to work. Only then will your business see measurable impacts on productivity, engagement, and turnover.
  47. 47. 47Sources 1. Megan Leonhardt, “The average parent expects to pay almost $1,000 for child care this summer,” CNBC, June 20, 2019, https://www.cnbc.com/2019/06/19/the-average- parent-expects-to-pay-almost-1000-for-summer-child-care.html
 2. Sarah Goldy-Brown, “The Average Cost of College in 2018,” Student Debt Relief, May 19, 2019, https://www.studentdebtrelief.us/news/average-cost-of-college-2018/
 3. Camilo Maldonado, “Price Of College Increasing Almost 8 Times Faster Than Wages,” Forbes, July 24, 2018, https://www.forbes.com/sites/camilomaldonado/2018/07/24/ price-of-college-increasing-almost-8-times-faster-than-wages
 4. Lyman Stone, “The Boomers Ruined Everything,” The Atlantic, June 24, 2019, https://www.theatlantic.com/ideas/archive/2019/06/boomers-are-blame-aging- america/592336/
 5. “Fact Sheet: Focusing Higher Education on Student Success,” U.S. Department of Education, July 27, 2015, https://www.ed.gov/news/press-releases/fact-sheet- focusing-higher-education-student-success
 6. Elissa Nadworny, “‘I’m Drowning’: Those Hit Hardest By Student Loan Debt Never Finished College,” NPR, July 18, 2019, https://www.npr.org/2019/07/18/739451168/i-m- drowning-those-hit-hardest-by-student-loan-debt-never-finished-college
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  51. 51. 51Chapter 01: Americans are stuck Over the past 30 years, income has stagnated for 90% of Americans. Healthcare costs have gone up by 400%, and the price of housing has increased by 200%. Americans are moving outside cities to marginally more affordable areas, taking on greater commute expenses, and grappling with childcare costs 1 which now often exceed college tuition 2 . Schedule your demo today even.com/demo

Very interesting study on US financial wellness examining the current situation (47% of the US population cannot meet unexpected expenses as low as USD 400!), the causes of the problem (time lag between when Americans earn their income and when they cash it in), and tentative solutions (includes earned wage access solutions & savings to build up rainy day funds).

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