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Help employees avoid living paycheck to paycheck

Published by: LifeWorks,

Generation Z face debt and credit threats

Generation Z, the newest generation to join the workforce, is confident and goal-oriented when it comes to earning money. But as a generation laden with student debt and the temptation of easy credit, they need support from their employer when it comes to managing their financial stress.

While this may not seem like an “employer’s problem” on the surface, the reality is that this stress hurts employee well-being and in turn can affect employee performance.

Our latest survey found that the main obstacle keeping Generation Z employees from achieving their financial goals is the high cost of living and living paycheck to paycheck is among their top financial stressors.

To perform at their best, Gen Z employees need to worry less about making it to payday. Here’s how you can help them avoid living paycheck to paycheck:

Student loan management

According to research from the Federal Reserve, there is an estimated $1.48 trillion in total U.S. student loan debt. This is a growing issue for young employees.

What’s more, Make Lemonade research found that the average student in the Class of 2016 has $37,172 in loans. As a result, they’re having to pay off a mountain of debt before even earning enough money to make ends meet and save.

Tip: Consider providing tuition reimbursement benefits by matching employees’ monthly payments. This speeds up their repayment and saves them a lot of money in the long-term.

Most importantly, educate employees on payback strategies, such as:

1) Debt avalanche: Establish a budget, then allocate extra cash to student loans with highest interest. When you submit payments, apply it to the principal.

2) Refinance: Take a new loan with a private lender, such as SoFi and Earnest, at a lower interest rate.

3) Biweekly payments: Split your monthly payment in half, then submit payments for that amount every two weeks. This adds a full extra payment each year, which saves money and time on the life of the loan.

When you get involved, you show that you care about employees’ well-being and want to ease their financial stress. This helps them be mindful about how they manage their debt and, in turn, how they spend each paycheck.

Emergency preparation

The Associated Press-NORC Center for Public Affairs Research poll found that two-thirds of Americans would struggle to scrounge up $1,000 to cover an emergency.

This is alarming because an incident like a car accident, injury, or home damages can send some of your staff spiraling into debt — one of the biggest employee well-being issues. Major life changes like divorce can be even more costly.

Generation Z are especially ill-prepared for emergencies. Our survey found nearly one in five Gen Z employees aren’t saving anything each month. One in four (23 percent) barely save anything, putting away less than $50.

Tip: Educate employees on how to budget their expenses and prioritize savings for an emergency fund. Share tips on building their savings, like:

  • Monthly goals: Determine how much to save each month. This can be as little as $25, but any amount helps.
  • The carry over approach: Transfer whatever money is left over from the last payday to your emergency fund.
  • Invest refunds: Tax refunds are always a great surprise. Instead of spending it frivolously, move it directly into your emergency account.

Preparing for an emergency is a necessity, just like buying groceries and paying rent. By educating younger employees about this, you’re giving them clarity to determine their true financial priorities.

The credit trap

Research from ValuePenguin found the median debt per American household in 2017 was $2,300, while the average debt was $5,700.

Help Gen Zers avoid the slippery slope of spending credit to cover everyday expenses. This is a bad form of debt.

Tip: Relying on credit cards leads to poor spending habits. It’s too easy to swipe plastic at the store and not realize how much you’re truly spending.

Show your employees how debt can get out of hand. Invite a Debtors Anonymous group into the office to share their stories about how simple it is to lose control. This warns Gen Zers against long-term unhealthy spending, which can eat away at each paycheck.

Spending habits

Just like any aspect of employee well-being, habits are the foundation of making a positive change in your life. And financial wellness is no different.

The best way to get out of paycheck-to-paycheck living is to establish healthy spending habits.

Tip: Provide employees with resources to help them assess their spending habits and form new ones that align with their personal financial goals.

Apps like Mint help, but you should also teach employees about how emotions can influence reckless spending. Encourage employees to self-assess to see if they suffer from emotional spending.

Common signs of emotional spending include:

  • Saying ‘I deserve it’ to justify a purchase
  • Using shopping as stress relief
  • Buying and returning items to avoid feelings
  • Making a purchase for immediate gratification

Retirement planning

It’s never too early to start saving for retirement, and Gen Zers want your help. Our survey identified retirement savings as one of the top types of financial wellness support Gen Z employees want from employers.

Tip: Promote incentives for those employees who sign up for retirement benefits, like a 401(k). When you reward participants, more employees will sign up and start their retirement planning.

Living paycheck to paycheck hurts employee well-being and adds a tremendous amount of stress to your staff. Show Gen Z how to start their financial wellness journey on the right foot.

Make your employees feel loved