When the Tide Recedes
Caught swimming naked
Because of the COVID-19 crisis, the vast majority of Americans are feeling intense financial strain. According to a new survey from the National Endowment for Financial Education, 88% of Americans say the COVID-19 crisis is causing stress on their personal finances. Willis Towers Watson’s 2020 Global Benefits Attitudes Survey found 38% of employees live paycheck to paycheck. Assuming this unfortunate reality is limited to low-income households would be wrong. While those families are certainly acutely struggling with food, housing and unemployment, the strain is felt across all income brackets. Of those making more than $100,000 annually, nearly 1 in 5 are living paycheck to paycheck.
Banks are receiving mortgage relief requests from those with monthly payments of $500, $1,000, $5,000, $10,000 and upwards. The CARES Act allows individuals to take early withdrawals of up to $100,000 from retirement plans without paying the 10% penalty. Clearly, a wide swath of us are urgently looking for ways to make ends meet. We’re reinforcing Warren Buffett’s sage observation: “Only when the tide goes out do you discover who’s been swimming naked.” It turns out, a lot of us are swimming naked.
At some point, we’re going to be able to go back to work, to school and to some semblance of our old lives. The economy will come back and record high unemployment will recede. However, some things should not return to normal. Let’s seize on this moment to have a collective financial wake-up call and fundamental conversation about the state of our finances. Because let’s face it — another coronavirus, financial crisis or natural disaster will come.
How can employers help?
Start thinking about how your organization can embrace and promote financial literacy. What have you done so far and what’s on your calendar for the rest of the year? Clearly your messaging may need to be adjusted to reflect the new COVID-19 reality. Does your workforce have any particular pain points? College debt, credit card debt, emergency savings? Did your organization furlough employees or take other measures that caused additional financial strain?
Next, get your arms around the information that’s available:
- Look to your 401(k) plan provider. Empower, Fidelity, Merrill Lynch and Vanguard all feature ‘financial basics’ sections on their websites.
- Take advantage of national programs, such as America Saves and the National Endowment for Financial Education (NEFE), which provide financial education and practical information to people at all financial stages.
- Check out Khan Academy’s ‘personal finance’ course.
Then, curate the content for your employees in a way that makes the most sense for your organization. Emails and print pieces can be great for spreading the word and building momentum, but you’ll want to house your information online for easy access. Consider either a place on your intranet, or an easy-to-implement, dedicated microsite.
Meet your employees where they are and keep your categories focused and simple:
- Live on a budget
- Pay off debt
- Have an emergency fund
- Save for retirement
It doesn’t need to be complicated, but make sure it’s not preachy. It needs to be real and relevant. Your employees will thank you for providing common sense information and resources to help them take their next— best—financial step. And, hopefully, we’ll all have our swimsuits firmly in place for the next time the tide rushes in.