January was a financial disaster for millions of Americans both directly and indirectly affected by the government shutdown. Mortgages went unpaid, credit card interest climbed, and spontaneous family dinners out screeched to a halt. Despite the back pay that those millions affected will receive, the coming restoration period won’t just be business as usual. It will take months to recover from what was an unwelcome surprise.
Even as we collectively watched from afar, the wheels began to turn in many of our heads. “What if I didn’t get paid for a month? How would that impact my life?” January was a time for empathy, not judgement, for those impacted by the shutdown. But now? Now is the time to ensure financial instability doesn’t lead to financial disaster.
Whereas most Americans are not likely to be forced to work for no pay for a month, many Americans will face economic hardships that can create similar feelings of instability and uncertainty. The operative question being “how will I pay this bill without enough current income to cover it?”
As a leader of your organization, you know the importance of cash, or cash’s reasonable cousin, a line of credit, to smooth out the bumps of cash flow challenges. In fact, running a business without cash stability tools is nearly impossible with various payment terms, vendor and customer demands, and capital investment needs. This is precisely why your organization strategically plans for the flexibility cash affords you.
Knowing this to be unequivocally true, business leaders everywhere should be asking themselves, “Am I doing whatever is possible to help my employees improve every aspect of their financial wellbeing, including building up their emergency funds?”
As the U.S. workforce becomes increasingly more financially stressed, company leaders should be more urgently seeking solutions. How long has it been since you took a complete inventory of your financial wellbeing resources, evaluated the gaps, and identified opportunities where greater financial education and support tools could be provided?
It is common sense that workers should maintain some level of cash savings for whatever life brings; but employers don’t necessarily facilitate reasonable and achievable processes to help workers build up those funds. Employers who take the initiative to support their employees in this way have the opportunity to make their organization stand out from the rest as a workplace that works better. But, how do you get started?
Develop resilient employees
If you’ve never leaned into the tactical side of encouraging your workforce to create their own cash stability tools, it’s time to help create resiliency in your workers and build on the strength of your organization. Resilience in the context of work-life integration means the ability to withstand, grow and adapt while weathering personal, professional and societal stressors.
The starting point often feels uncomfortable and inappropriate — you must talk about the importance of financial stability for your people. If you have an honest, vibrant workplace culture, your insistence will feel authentic and likely be well-received. If you haven’t quite taken your culture to the place you’d like, your declaration of the importance of an emergency fund may seem foreign and unfamiliar. That shouldn’t dissuade you from taking on this worthwhile campaign.
Encourage saving for emergencies
The harsh reality is your people, from the top down, struggle with concepts as fundamental as maintaining a proper emergency fund. Your best managers, salespeople, project leads, and technicians may not have the ability to survive a financial emergency equal to one month’s pay. This affects the stability of your organization.
A proper emergency fund consists of roughly three months’ worth of a person’s expenses. This suggests accumulating an emergency fund from scratch is going to take some time. In fact, it can take a year or more for most people to properly plan for the unknown.
There is a tremendous amount of opportunity potentially buried within your compensation strategy and frequency. For instance, consider these strategies:
- If you are an organization that offers overtime and/or a reliable bonus program, launching a financial preparedness communications campaign to your workforce aligned with periods of overtime or near bonus payout time is likely to make an impact.
- If your pay frequency is 26 or 52 pay periods per year, there will be a few months in which your people receive an “extra” paycheck. With the right timing, those extra paychecks can be the base of an emergency fund.
Look at financial wellbeing holistically
A great deal of attention is paid to retirement planning in our country, but not enough attention is paid to the day-to-day events that create financial cracks and eventually fissures. And while it’s not possible to eliminate stress entirely, developing your employees’ financial health and individual resilience will help them withstand the inevitable ups and downs that life brings.
Your people will greatly appreciate your willingness to acknowledge and help mitigate the present challenges in their financial lives. Through this process, not only will you connect with them more deeply, but you will prevent productivity issues before they ever begin.
You will not regret taking on this initiative. Your workforce’s financial lives will be stronger, your culture will be more resilient, and in turn, your organization will thrive.
This material was created to provide accurate and reliable information on the subjects covered, but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.
Gallagher Benefit Services, Inc., a subsidiary of Arthur J. Gallagher & Co., (Gallagher) is a non-investment firm that provides employee benefit and retirement plan consulting services to employers. Securities may be offered through Kestra Investment Services, LLC, (Kestra IS), member FINRA/SIPC. Investment advisory services may be offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Certain appropriately licensed individuals of Gallagher are registered to offer securities through Kestra IS or investment advisory services through Kestra AS. Neither Kestra IS nor Kestra AS are affiliated with Gallagher. Neither Kestra IS, Kestra AS, Gallagher, their affiliates nor representatives provide accounting, legal or tax advice. GBS/Kestra-CD(310588)(exp031120)