Increased living costs are continuing to impact employees' overall financial picture — and salary increases aren't keeping pace, leaving employees further behind than ever.
According to a new report by Bank of America, 67% of employees feel the cost of living is outpacing their salaries, forcing many to focus on short-term financial needs, versus longer-term goals like retirement. As such, just 42% of employees
Thinking long-term is getting more difficult for many employees — just 31% are continuing to
"When employees neglect saving for the future or pause due to financial strain, they risk not having the finances they need to support themselves in retirement," says Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America. "Even amid economic uncertainty and rising costs of living, it is critical for employees to put money in a retirement savings account — even if it's a small amount — because those savings will only grow over time."
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With so many competing financial priorities, employers do feel added pressure to help their workers: the BofA report found that almost all employers (96%) feel somewhat or extremely responsible for their employees' financial wellness. However, those concerns have been slow to translate to action, as just two out of five employers offer
Sabbia says this could be due to a gap between the types of solutions employees want and what and how employers offer them. Communication is critical to getting on the same page, she says.
"We often see a disconnect between employers and employees, with the latter craving more guidance and communication on workplace benefits and resources," Sabbia says. "Communication should be consistent and clear and offer opportunities for employees to speak with a HR representative if they need more information. Employers can introduce resources like budgeting tools, financial scorecards and calculators, and access to financial professionals."
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For women in particular, these financial tools are necessary, especially as costs around caregiving are shouldered more by this group. Women on average also live longer, meaning they need to save more for both retirement and the healthcare costs that could come with older age. The Bank of America report found that women's financial wellness is at a five-year low, and they feel less optimistic than men about their financial situation improving in the next few years.
Tailoring benefits to specific groups and financial needs is not only a smart decision for employers, but it has a trickle-down effect on over employee well-being, too: BofA found that 42% of employers that offered financial resources saw a
"Finances and emotional health are intertwined," Sabbia says. "[To address that] requires investing the time and resources to understand the needs of your workforce, and then expanding benefits to meet those needs."
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Offering 401(k) plans continues to be an important tool to managing long-term savings, but Sabbia also encourages employers to stress the necessity of health savings accounts to prepare for expensive healthcare costs in the future. Access to financial planners and digital planning tools can also help employees make a secure plan to manage their needs today and as they move forward, no matter how their financial circumstances evolve.
"Employees' lived experiences are not monolithic and, as our research continues to show, neither should employees' benefits be," Sabbia says. "Every employee is experiencing their own challenges — whether that's stress from paying back student loans or managing caregiving responsibilities with their career. Employers need to provide benefits that address the needs of employees within their workforce — for both financial and overall wellness."
