How can employers help their employees save money and manage debt?

There is a need for debt management training as part of financial wellness education. There is general interest from employees. Digital delivery is preferable; however, some employees will prefer 1:1 counseling from a live person. How can the need be addressed? How can the employer help the employee solve their problem? This problem is not unique to the US. It is showing up in the UK too.

Paying competitively. This is obvious. If you are underpaying your employees relative to your competitors, they will get hired away. Training new employees is costly in terms of money and time. It is easy for a competitor to hire the people you trained if you are not paying them well. Let us assume you are paying competitive wages.
Provide opportunities to earn more. We are in a nationwide labor shortage. "Help wanted" signs are everywhere. Restaurants in your area might be closed for lunch or not serving dinner on certain weekdays because they cannot get the staff. Your firm likely faces the same problem. Offer additional hours and overtime for employees who want to work longer hours.
Promote from within. A simple way to pay down debt is to earn more money. Moving up the career ladder is the traditional path. The pandemic has created many job vacancies as experienced employees who were close to retirement age decided to leave the workforce. This is an opportunity to let the next generation move up.
Include financial wellness training. This could start with budgeting. There is a big need. According to Intuit, 65% of Americans do not know how much they spent in the previous month. The article points out the greatest offenders are Gen Z, followed by millennials.
Does your firm offer employee counseling? Some employees prefer to discuss their financial issues with a live person. In some cases, they prefer someone more anonymous than their manager. Employee Assistance Programs (EAP), referenced in the UK but also offered in the US are a broad-brush solution because they also can address and refer in areas like mental health and substance abuse.
Raise awareness of savings vehicles. Many firms offer 401(k) plans as a benefit; 64% of US private sector employees have access. Many companies offer Health Savings Accounts (HSA); and 49% of S&P 500 companies offer employee stock purchase plans (ESPP). Raise employee awareness of how they can build a nest egg.

What do employees need to know about credit card debt?

Let's get back to the subject of fat and how it is similar to debt. You have heard, "A second on the lips, a lifetime on the hips." Employees may not be aware of how easy debt accumulates and how they can get into problems. The education you provide should cover several major topics including the ones listed here.

Credit card interest rates are much higher than bank savings account rates. According to bank.rate.com, as of 3/23/23, you can find a money market interest rate paying 4.25%. That is pretty high considering where rates were a year ago. Meanwhile, according to wallethub.com, the average rate on existing credit card accounts is 19.07%. Banks and credit card companies are eager to lend you money because they make a lot of money in the process.
Don't be late. You have heard the expression "A day late and a dollar short." If a friend borrows money, you might be OK if they took longer than expected to pay it back or if they still owed you a bit. Credit card companies are not benevolent friends. If you are 60 days late in making your payment, you may get bumped up to the penalty rate. This might be up around 29.99%.
Credit card interest is not a tax-deductible expense. It might have been once, but not anymore. Taxation is complicated, but mortgage interest and Home Equity Line of Credit interest might be deductible, interest on consumer debt is not. Not only are you paying a bundle, you are not getting any tax benefits.
Honor thy credit rating. How much you owe and how quickly you pay is expressed in your credit rating. This number becomes very important when you want to buy your first house and need to borrow money by taking out a mortgage. Your credit rating will follow you for your entire life. After a while, no one really cares about your GPA from college. Borrowers will care about your credit rating.

What proactive steps can employees take to get out of debt?

You have heard the old expression, if you find yourself in a hole, the first thing to do is to stop digging. People with a debt problem need to change their habits. These three suggestions are easy to implement.

Get a charge card instead. American Express issues plenty of different cards, but the plain vanilla card is not technically a credit card. You make charges during the month; you get a bill and you pay them off before the due date. Put another way, your account is cleared every month.
Carry cash. Going out on a Friday night? Give yourself an allowance in cash. That's the green stuff. Keep an eye on your spending. When your money runs low, stand up and go home. You get a better sense of what things cost when you pay with cash.
Use a debit card. It's like a plastic check. You are spending your own money, the cash you have in the bank.

Many employees are concerned about their credit card debt. They have an interest in financial wellness education and feel their firm should be providing it. Helping employees in this area can lead to higher employee satisfaction and lower turnover.

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Employee debt affects the workplace: Rolling out the right financial wellness solutions

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