Women and Financial Wellness: My Chat with Jessica Ruggles
I was a skeptic. I kept (and keep) seeing all these industry events about how to get women as clients or how to help them invest. It was like women were rare as white buffalos and harder to catch as investment clients. I still think this is crazy talk. Women are humans and buy on trust and relevancy. Full stop.
Financial wellness, however, is a different story. Women generally do encounter different scenarios and risks than men that affect them financially. They tend to make less, they live longer, they tend to be the default caretaker of family members, often leaving work for this role at some point, and they tend to be less involved in financial decisions. This was the topic of my recent Linkedin Live with Jessica Ruggles, Financial Wellness Strategist with Prudential Financial.
Prudential Financial Wellness Census 2020 Findings
It’s no secret that women have been impacted more than men by the Covid pandemic, and Prudential’s most recent financial wellness survey confirms that. Jessica touched on a few of the findings of the survey:
2 months of the pandemic was enough to wipe out 2 years of financial gains
52% of woman were concerned about their financial future
19% of women saw household income fall by half or more, amid the crisis
24% of women said they were unemployed (that’s 15% higher than men)
Women are not only more impacted by the pandemic, they are also more stressed, plus they’re more open to - and want - more benefits changes
From our own research regarding the pandemic, the National Bureau of Economic Research found that the pandemic has forced women out of the workforce at disproportionately high rates; almost four times more than men.
What all this tells us, says Jessica, is that there are barriers to financial wellness and retirement security for women that must be addressed, but there’s also an opportunity for employers to provide more prescriptive benefits programs that will help to recruit and retain women in the workforce. Fortunately employers seem to be taking note; Prudential’s recent Employer Perspectives Survey (October 2020) found 79% of organizations will focus on total wellness (physical, mental, financial) in the next year.
Are Women-Focused Financial Wellness Programs Even Necessary?
As I mentioned above, I initially didn’t think that focusing on women’s financial wellness was really necessary for businesses, but even pre-pandemic, women have faced more and greater financial challenges than men. Thus both Jessica and I agree that yes, there should be more emphasis on financial wellness programs for women, and it is an issue that companies should get involved with.
Employers are a critical component of workers’ well-being, says Jessica, and they should make the effort to highlight the benefits programs they offer and how best to use them. (If you’ve kept up with our thought leadership, you know we beat that drum all day.) They also need to keep their employees’ needs in mind: how do they address those needs, and how should they measure success?
It’s not about “pinkifying” existing benefits - it’s about providing authentic and supportive solutions for women that address their specific needs.
Historical Challenges: Gender Pay/Underemployment & Wealth Gap
When it comes to pay equity, there are a number of barriers facing women:
Underemployment: College-educated women in the U.S. make 90% as much as their male counterparts at age 25. But by age 45, they make 55% as much. Women have been disproportionately affected by COVID 19’s economic impact to employment, and unfortunately bias in hiring decisions may also affect job opportunities. According to research by Time’s Up, 34% of men in hiring roles think men are more entitled to jobs than women when unemployment is high.
Wage gap: On average in 2019, women were paid 22.6% less than men, after controlling for race and ethnicity, education, age, and geographic division. This is heightened during the pandemic, as women health care workers are providing care on the front line, but they are paid less than their male peers. For example female RNs are paid 8% less than male RNs.
Wealth gap: While the wage gap refers to how much women earn compared to men, the wealth gap is how much women own or keep, in comparison, and is attributed to a host of issues, including debt, credit score, divorce, real estate ownership, and investing actions.
How to overcome these challenges? Better representation in certain industries can help, as can having more women at the executive level and as board members. Visibility is extremely important. It’s a lot easier for the younger generation to imagine themselves in top roles if they see someone that looks like them in it.
Child Care/Caretaking
Caregiving support is another benefit that there’s been an increased need for, especially within the healthcare and insurance industries, according to Jessica. A recent McKinsey survey showed that about one-quarter of women are considering leaving the workforce because of caregiving responsibilities.
The challenges around caretaking and child care predate the pandemic, and will likely continue afterwards. As a result, many women experience not only financial stress, but emotional, physical, and mental stress, resulting all too often in burnout. Fortunately many companies are stepping up and offering solutions such as child care support, eldercare support, and flexible working arrangements. (Sidenote: check out Voya Cares for caregiving resources.)
Retirement Insecurity and Longevity
Heterosexual couples tend to self-report sharing financial decisions, but statistically, we often find that women tend to steer day-to-day finances, while delegating long-term planning and investments to their partners. So, how can a plan sponsor provide non-solicitous financial education for women, to feel more informed and empowered when it comes to understanding their long-term financial wellness, which can protect women from negative effects after a divorce or death of their spouse?
Education and support is critical, but communication is key, as well. Providing jargon-free financial information, and focusing on simple messaging, can boost financial confidence in women. (Can we also agree that this would help, literally, every employee?)
Here are a few sobering statistics from the 2020 Women’s Retirement Literacy Report from The American College of Financial Services:
Only one in four women (14%) feel knowledgeable about retirement income planning.
Four in ten women (43%) feel less comfortable with investment risk because of the COVID-19 crisis.
Only 16% of women feel very knowledgeable about investment considerations for retirement planning, though self-reported knowledge seems to increase with age and assets.
Only 14% of women feel knowledgeable about strategies for sustaining income in retirement.
Only two in ten (20%) women feel highly knowledgeable about Social Security and one out of ten (10%) respondents feel educated about annuity products in retirement.
Debt
Credit Card debt has long been a problem for Americans in general, but there are specific statistics on credit card and particularly student loan debt that should give us pause. Here are some Jessica shared with us:
Households, on average, carry nearly $17,000 in credit card debt, with almost half not able to pay off this debt within two years (Bob Sullivan, State of Credit: 2017, Experian, January 11, 2018). In the first quarter of 2020, the total U.S. household debt was $14.3 trillion and the number continues to climb year over year (The Federal Reserve Bank of New York, “Q1 2020 Household Debt and Credit Report”).
According to Prudential’s Financial Wellness Census, of households who were affected by the coronavirus pandemic, 17% saw income drop by at least half, 15% reduced or exhausted emergency savings, and 11% experienced increased debt, such as having to use a credit card more or take out personal loans.
Credit card bills are a common source of financial stress, particularly for Millennial women. While not investing enough is women’s top financial regret, it’s not their only regret. Women also report that they wish they had not taken on as much credit card debt (“Women & Financial Wellness: Beyond the Bottom Line,” A Merrill Lynch Study Conducted in Partnership with Age Wave, June 2019).
In the U.S. 66% of the amount of outstanding student loan debt is held by women, and the debt is even higher for African American and black women, who owe $11,000 more than male graduates and $8,000 more than white non-Hispanic women. (Women’s Law Center, 2020). This has grown during the pandemic. Total household debt increased by $87 billion to $14.35 trillion in the three months ending Sept. 30 (New York Fed's Quarterly Report on Household Debt and Credit) and outstanding student loan debt stood at $1.55 trillion in the third quarter a $9 billion increase from the second quarter. (New York Fed's Quarterly Report on Household Debt and Credit, 2020).
While workplace sponsored programs are not conducive to solving credit card problems (who wants to fess up to how much they have on their card in front of their peers or boss?!) but providing programs on basic blocking and tackling of budgeting and saving can go a long way, not just for women, but all workers. Student loan debt continues to be a drain on finances and corporate payback programs continue to be an excellent recruiting tool.
Helping women and the path forward to wellness (within the employer-sponsored benefits plan)
As Mark LeBusque, a well-known Australian speaker on HR issues, likes to say when presented with a problem, "And what’s your part in this mess?" It’s about taking accountability, but it’s also aimed at what we can do about it.
So what CAN smart companies do to help women while we still see these trends prevalent? (See what I did there? This is how it should be measured for progress, and employers can do that right down to the departmental level if they want to.)
Savings
Partner with your 401k recordkeeper to establish a sidecar savings account. This is an after tax “bucket” in your plan that employees can access rather than their 401k savings. After they save $1000 in the after tax savings, switch their contributions to the long term pre-tax or Roth 401k. Another way to do this is partner with a local bank or credit union to allow for payroll contributions to go to a savings account. Or, if 401k loans are an issue and taken for the same reason often, partner with a financing company or set up a corporate discount on those items that employees are taking a loan for to protect 401k assets.
Student Loans
Offer a company payback plan. Small amounts go a long way and the math is hard to figure out at first, as I mentioned in Linkedin Live. Here’s what I didn’t say, but will mention here:
Pretend the lifetime cost of an employee’s student debt is $32,800 and it will be paid off in 15 years.
A $50/mo ($6,000 total over the life of the loan) employer contribution will save them $10,600 on the lifetime cost of that loan -- they’ll pay it off 5 years sooner.
A $100/mo ($9,300 total over the life of the loan) employer contribution will save them $16,100 on the lifetime cost of that loan -- they’ll pay it off 7.25 years sooner.
Few employers offer the corporate student loan payback program (4% according to Willis Towers Watson back in 2016). Be special. Invest $600 a year in a worker ($0.29/hour) for 10 years and give them $10,600 worth of benefits. Or, let them change their unused benefits dollars, such as vacation time, into money that goes to their student loans instead. Referencing my total rewards blog, dust off that compensation strategy, grab your retention numbers for job classifications, and take a fresh look. Oh, and call us :)
Additionally, many student loan benefits can be offered for free, such as counseling and repayment options. Retirement plan recordkeepers are partnering with student loan benefit companies to create an integration for financial education and extending your suite of benefits…fo’ free!
A Few Final Notes
One more trend we noticed in our own clients was how work might change after the pandemic. I reached out to Jennifer Folsom, VP of Growth at ICF Next and author of The Ringmaster: Work, Life, and Keeping it All Together and asked, what can employers do to keep women in the workforce? Her first suggestion was to be flexible and unafraid to bend policies, but in a sustainable way. While the pandemic has led to perks like buying Disney Plus and ordering meals for employees, this is not sustainable, especially not for many small businesses who do not offer extensive benefits.
Rather, she suggested, “The single most important thing is to normalize flex hours and the caregiving reality that we’re in.” An important focus for her when being recruited by her new employer was how they were approaching employee support during the pandemic. As she saw unexpected family members interrupting zoom calls during every interview, it was obvious they weren’t just talking the talk, but walking the walk.
So in summary: tailoring financial wellness programs to women and their unique challenges does make sense for companies. Offering benefits such as financial education, child care/caretaking support, flexible work arrangements, and student loan payback programs can go a long way toward attracting and retaining women in the workforce, as well as improving their financial outlook and retirement outcomes. We’re happy to be your partner in that endeavor.