First posted by CFED here.

Although the U.S. economy continues to improve, finances remain a major source of stress for many Americans. Increasing debt, rampant predatory lending practices and low retirement savings continue to be issues for a majority of households. Pew Research Center found that more than two out of five American consumers are experiencing major financial difficulties. This increase of financial stress impacts worker productivity and reduces financial stability for households.

Research has found that financial stress is widespread. The American Psychological Association finds that low-income consumers, especially younger low-income consumers, experience significantly more stress than the average American. And this stress doesn’t go away when an employee enters their workplace. Employee stress levels have an impact on business’ bottom-line. One study noted that “stress is one of the leading causes for the loss of employee productivity in the US.” The White House emphasized this issue, adding that as many as 15% of workers are stressed to the extent that their productivity is suffering. They also find that stressed workers are more likely to skip days of work.

Employers are beginning to recognize that financial stress is a problem and are attempting to respond with services. According to a survey by the Society for Human Resource Management (SHRM), a little more than half of employers offer at least some type of financial education to those on their payroll. However, a key component of ensuring financial wellness and thereby relieving stress for these groups of consumers is to provide programs that simultaneously build financial knowledge, increase financial skills and provide access to financial resources.

There has been a growing interest in providing financial wellness programs in the workplace, but often these are primarily focused on financial literacy, not on financial capability.

What’s the difference?

Programs focusing merely on financial literacy rarely lead to behavioral changes. Classroom-based one-time financial literacy sessions may teach people more about finances, but they don’t usually lead people to take concrete actions that would tangibly change their financial lives. Financial capability programs, on the other hand, provide consumers with more personalized and hands-on assistance to both help clients understand their financial situations and promote access to resources. Financial capability programs, as their title suggests, ensure that individuals not only achieve financial literacy, but are fully capable of navigating their own financial lives and have access to appropriate financial services.

At CFED, we recognize the necessity of meeting people where they arein their financial situations by integrating financial capability into existing platforms where low- to moderate-income consumers already interact. For many, the workplace is a key place for this integration to occur. Human resources or finance personnel are well-positioned to discuss personal finances in the workplace, and workers are typically already having personal finance conversations with their employers regarding retirement benefits, direct deposit and health insurance. This makes the workplace an optimal place for individuals to plan for their financial futures, discuss financial challenges and access key financial products.

For example, employers can help establish plans of action for when individuals receive their bi-weekly or monthly paychecks. Whether this be opting to set money into a retirement account or opening a bank account, starting to plan before the money is spent can make it easier for consumers. One study (Lusardi and Mitchell) that addresses the importance and necessity of financial planning found that those that plan for the future are more likely to accumulate wealth no matter what their race, occupation, etc. Regardless of your current financial situation, planning is important.

As many employers begin to recognize the need to reach out to their employees about their financial lives, it is important to implement effective programs.

An Urban Strategies Council publication on “Employer-Based Asset Building Strategies” addresses how workplace-based financial education programs might not always stand up to a cost-benefit analysis. They wrote that if “financial education is coupled with services (e.g. free tax prep on site), products (e.g. prepaid debit card or IDA program), and opportunities (e.g. auto-enrollment) that have tangible consequences for employee financial health, the outcomes could be worth the

[employer] investment.” In other words, in order for a program to be effective, it cannot solely consist of a simple financial education program.

Instead, a more intense and personalized approach can show positive financial outcomes. In fact, a study analyzing a financial wellness program, involving both financial training and coaching elements, from The Federal Reserve Bank of Kansas City found that “for [their] study cohort, money balances in individual retirement accounts (IRAs) increased 51.2%, and money balances in non-retirement accounts increased by 31.4%.”

Looking forward…

Despite the need to establish work-related financial-wellness programs, there is limited research demonstrating the effectiveness of existing programs. Further research is needed to find quantifiable increases in individuals’ financial capability and security due to such programs. If properly designed, financial capability programs administered through the workplace could build financial security for and alleviate the financial stress of millions of Americans.


Bailey, William C., Kay Woodiel, Jean Turner, and Jenifer Young. 1998. “The Relationship of Financial Stress to Overall Stress and Satisfaction.” Personal Finances and Worker Productivity, 2:2, 198-206.

Edmiston, Kelly D., Mary C. Gillet-Fisher and Molly McGrath. 2009. “Weighing the Effects of Financial Education in the Workplace.” The Federal Reserve Bank of Kansas City.

Lusardi, Annamaria and Olivia S. Mitchell. 2007. “Baby Boomer Retirement Security: The Roles of Planning, Financial Literacy, and Housing Wealth.” Journal of Monetary Economics, 54:1, 205-224.

Tuominen, Mary C. and Eleanor L. Thompson. 2015. “There Was No Money Left to Save”: Financial Literacy and the Lives of Low-Income People.” Journal of Progressive Human Services, 26:2, 148-165.