Why 80% of American employees have problematic debts

When a CEO stays up at night worrying about business problems, debt-ridden employees would normally not be on this list.

He has now.

According to the Employee Benefit Research Institute’s 2022 Workplace Wellness Survey, “Most employees are concerned about the financial well-being of their household, and most employees describe their level of debt as a problem.”

Employees also say their employers “have a responsibility to make sure they are well physically, emotionally and financially,” but less than half “highly rate their employer’s efforts in these areas.”

The report notes that 3 in 5 staff members (60%) are at least moderately concerned about the financial well-being of their household, up from 49% in 2021.

At least 4 in 5 employees (80%) describe their level of debt as a “problem”.

Additionally, about half of employees are concerned about their emotional (50%) and physical (48%) well-being.

Employers are obligated, employees say

The report notes that 77% of employees say their employers have a responsibility to ensure staff members are mentally and emotionally healthy.

According to the study, two-thirds (66%) say it’s their employer’s responsibility to ensure employees are financially secure and healthy.

Critics may say employees earning a living wage should look after their own financial health, but forward-thinking companies should feel differently, some business experts say.

“In recent years, key metrics such as job satisfaction, satisfaction with benefits, and work-life balance ratings have remained fairly consistent,” said Lisa Greenwald, CEO of Greenwald Research at Washington.

“It’s important to note the declines measured this year in overall benefits satisfaction and in work-life balance ratings, which contrast with stable job satisfaction,” she said. Additionally, more employees report that working remotely has improved their well-being.

Thus, the decline in overall satisfaction and work-life balance “underscores the need for employers to step up their wellness efforts,” she said.

Need for financial knowledge

According to the research institute’s study, American workers are indebted in high-risk areas like credit cards, health care expenses and student loans, among other household financial concerns.

Finance professionals say a little education could go a long way to solving some of these employee debt problems.

“Addressing financial literacy is essential to money management,” said Neha Mirchandani, Chief Marketing Officer of BrightPlan.

The San Jose, California-based company’s 2022 Wellbeing Barometer survey showed that only 13% of employees were able to answer four out of five basic questions about financial literacy. It’s a bigger and more common problem for people than previously thought.

“A person struggling with financial anxiety can’t become financially secure if they don’t understand what they need to do to get there, and that starts with developing their financial literacy,” Mirchandani said.

Those with higher financial literacy are more likely to make ends meet than those with lower financial literacy.

According to the BrightPlan study, smarter financial consumers spend less than their income, set aside emergency funds; and understand their retirement savings needs. “The higher a person’s financial literacy, the less likely they are to experience financial anxiety,” Mirchandani added.

Should employers do more to educate staff?

Does this mean that employers should at least take a bigger role in educating employees on money management issues?

“Philosophically, you might argue that employers have a role to play in the financial security of employees, but in reality, it’s the employee’s personal responsibility to stay financially secure,” said John Shrewsbury, financial advisor and co-owner of GenWealth Financial Advisors, Bryant, Ark.

“It’s not the employer’s responsibility if one of their employees went out and overpaid for a house or a car, or used their credit cards.”

Shrewsbury says employers can play a role in providing employees with financial education, which includes not only helping them understand their 401(k) plans, but also providing them with personal financial education.

“A financially stable employee is a better employee than one with money problems,” Shrewsbury said.

“Employers can provide this education on a massive scale, which can give employees the push they need to correct some financial mistakes and get on a better path.”

“But at the end of the day, it is the employee who must act and follow the advice.”