High stress plus high levels of uncertainty

Liz Davidson, founder and CEO of Financial Finesse, noted that stress of all kinds has been high in recent years, but that uncertainty about the future is bringing an added level of concern. "This is the highest [level of stress] since the great recession, but we're layering on this uncertainty that is at higher levels as well. Stress is about your current situation… but they're also worried about the future," she said during the webinar. "Things we thought we could count on and were stable and steady are starting to feel like they're not as stable and steady as we thought…. It is a one-two punch that plan sponsors need to be aware of."

The report noted that the average overall financial wellness score has been trending down, based on feedback from customers who use financial planning tools provided by Financial Finesse. The data showed the average financial wellness score for American workers dropped from 5.12 to 5.04 between 2021 and 2022. The report added that the%age of financially resilient workers decreased from 37% in 2021 to 32% in 2022, probably due to inflation.

Certain groups are at higher risk

The report and webinar discussed how different types of employees are at especially high risk for financial stress. Financial stress was highest among single parents, the study found. For example, unmanageable levels of stress were reported at 57% for single parents—more than double that of married parents at 23%. The second-highest level of stress was found with single workers without children, 28% of whom reported unmanageable levels of stress. Workers who were married without children reported much lower levels of unmanageable stress, at 15%.

The study also confirmed that financial stress can be worse due to racial inequalities and that those inequities become more pronounced during the pandemic. "In 2022, Black and Hispanic populations were 38% and 28% less likely to have a positive cash flow than their White counterparts, respectively," the report said.

"You don't have one workforce; you have many workforces," said Julie Everett, senior financial planner at Financial Finesse. "It shows the need to target the right employees at the right time" with solutions for financial stress.

The webinar and the report discussed the use of Employee Resource Groups (ERGs), to reach demographics and groups that may have varying needs for help with financial stress and overall wellbeing. These ERGs are usually employee-led groups that seek to foster a diverse, inclusive workplace aligned with their company's goals. ERGs are usually led and participated in by employees who share a characteristic, whether it's gender, ethnicity, religious affiliation, lifestyle, or interest.

The report found clear data on how working with ERGs can close gaps in financial wellness issues. The use of ERGs to help employees find resources resulted in 34% of participants saying they were engaged in financial wellness benefits for the first time. And 97% said they felt better prepared to make a financial decision for the first time. In addition, there was a 25% decrease in the number of participants who said they had high financial stress levels.

"The findings are consistent… it's really become a best practice to work with the ERGs to co-create and really understand, 'what are your biggest and most pressing financial concerns, that if we could alleviate, would really reduce your financial stress,'" Davidson said. Because the employees are involved, she added, they feel ownership of their company's programs that aim to address the issue.

An instructive case study in financial coaching

The webinar and report focused on one case study of a worker who was struggling with anxiety and stress. Derek (not his real name) joined a financial coaching program that helped set realistic goals and a budget that did not stress drastic sacrifice but instead was accommodating to his real-life needs. At Financial Finesse, members are offered personal coaching paired with AI-based financial coaching programs that can be personalized for employees.

"Sometimes when you go out and try to find budgeting help on your own, it's not going to take into account the things that you need to get you out of bed," said Julie. "Maybe it means you have a level of responsibility to help support family members. Those things can be important when combining mental health with financial wellness."

Related: Feel their (financial) pain first, then employees can focus on retirement planning

In addition, Derek set up two savings accounts—one for emergencies and one for planned expenses like traveling. In addition, he stopped using a credit card and instead used a debit card for everyday purchases.

Those steps, along with regular check-ins with his financial coach, helped Derek cut his credit card balance in half within eight months and save $5,000 for emergencies. Derek reported a reduction in anxiety and feeling gratitude toward his employer. He also expressed the hope to be a role model for others who experienced financial stress.

"He has become an absolute advocate of working with a financial coach; he's hoping to share his story and share the experience," Everett said. Davidson added that desire to be a role model is something that is happening with a lot of employees who have had good results with financial coaching. "We're seeing this groundswell of people who have been through the process of financial coaching and saying that this is something we should be talking more about," he said. "They're willing to advocate and when they do it, then they are more likely to continue their own progress. Employers can talk to them all day long about how important it is, but when they hear it from someone whose story resonates [with their own life], that's infinitely more powerful."