Resilience is key to financial wellness and “one of its strongest contributing factors,” according to two new reports.
On Tuesday, financial wellness pioneer Financial Finesse released its 2020 Financial Wellness Year in Review (YIR) and a companion Race and Financial Stress Special Report, which looked at racial disparities in financial wellness.
To better understand financial resilience, Financial Finesse assigned employees studied to one of four groups—the financially resilient, susceptible, determined, and vulnerable—based on the presence or absence of an emergency fund before and during 2020. The analysis showed:
Financial resiliency is sticky (and attainable)
Ninety-four percent of employees that had an emergency fund prior to 2020 maintained it, and 26 percent of employees who needed an emergency fund acquired one in 2020.
Cash flow and debt management are king
Employees who have a handle on cash flow and an emergency fund are 17 times more likely to report “no” financial stress and 4.5 times more likely to be comfortable with their debt than those with neither.
Minorities and women made great strides
Black, Hispanic and female employees, and those with lower HHIs (<$60,000), experienced the highest net improvement in financial resilience.
Significant disparities still exist
For example, single, Black moms are seven times more likely to have high or overwhelming financial stress than married, Asian dads.
“There is no mistaking the influence that cash flow and debt have on financial resilience,” Financial Finesse Founder and CEO Liz Davidson said in a statement. “For employers seeking to improve financial well-being across their organizations, with focused attention on those who need help most urgently, integrating a holistic financial wellness benefit built to tackle proven determinants of financial resiliency with personalized and ongoing coaching, is an effective, ROI-positive way to take action.”
DOWNLOAD THE FULL “2020 FINANCIAL WELLNESS YEAR IN REVIEW (YIR)” HERE
“Debt is one of the biggest factors affecting workers’ retirement expectations and ability to save or prepare for retirement,” added Craig Copeland, Senior Research Analyst for the Employee Benefit Research Institute (EBRI).
DOWNLOAD THE FULL “RACE AND FINANCIAL STRESS SPECIAL REPORT” HERE
According to EBRI’s Retirement Confidence Survey, workers who are comfortable with their debt are nearly twice as likely to be confident about their retirement, and 55 percent more likely to have saved for retirement, than workers who consider debt to be a major problem.
“Getting debt under control and focusing on financial resiliency during one’s working years can make all the difference in having a financially comfortable retirement, ” Copeland concluded.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
