Employee Financial Security – Where Are My Employees’ Emergency Savings?

Corporate HR has been very busy the last few years, between retirement design changes such as auto-enrollment and auto-escalation, to now implementation of Affordable Care Act (ACA) mandates. However, and despite the good intentions of these efforts, employee financial safety remains elusive.  This is a problem for HR managers as not only does financial stress impact workforce performance in the short term, it also drives retirement outcomes in the longer term, two talent management challenges HR is increasingly asked to solve.

MetLife recently released their 2013 annual study, Benefits Breakthrough: How Employees and Their Employers are Navigating an Evolving Environment.  Some sobering statistics about the direction of employee savings:

  1. 57% of employees are “very concerned” about their financial condition should a principle wage earner no longer be able to work.  In 2012 this number was 51%.
  2. 44% of employees are currently very concerned about meeting monthly living expenses.  In 2012 38% of respondents reported this.
  3. Lastly, 48% were very concerned about having enough money to cover out of pocket medical costs.  In 2012 40% of respondents reported similar conditions.

In HelloWallet’s recent research we found similar findings, undoubtedly contributing to this anxiety:

  1. Less than 20% of households have sufficient emergency savings, which for purposes of the study was defined as three months of living expenses
  2. Almost 80% of households under-estimate how much they need in emergency savings
  3. And, in some ways perhaps most disappointingly, of the 20% in households who do correctly estimate how much they should have in emergency savings, only a third of those households have built up this reserve.

It should not come as a surprise that this financial stress and overall lack of awareness and preparedness is contributing to the recent 401k loan and 401k cash-out activity.  We know that households with insufficient emergency savings are twice as likely to breach their 401k savings for non-retirement purposes.

HR professionals are increasingly seeing the proverbial “forest for the trees,” and installing the systems to capture these talent risks, as well as the tools to mitigate.  But as the recent MetLife study shows and HelloWallet research confirms, we still have our work cut out for us.

Aaron is both CFO and CHRO at HelloWallet. At times wearing these two hats can result in long conflicts in Aaron’s head, however it makes him an excellent writer on both subjects. Aaron has also been called HelloWallet’s healthcare consumerism chief as he is both passionate and increasingly knowledgeable on the topic. Aaron joined HelloWallet after working at GM, The Carlyle Group, and Deutsche Bank, though started his career as a nuclear engineer in the US Navy.  When Aaron isn’t pondering the ROI of office improvements and compensation and benefits packages, he can be found traveling, exercising and spending time with his wife and their three children.

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