The US economy is healthy and growing, but many American households remain stymied by debt, unable or unwilling to save, and emotionally strained over personal finances. The aggregate household debt to income ratio has risen steadily from 0.6 in the 1980s to 1.0 today.1 Consumer debt in America now tops $13 trillion, exceeding the massive debt adults in the United States had prior to the 2008 financial crisis. The added debt burden has negatively affected both mental and physical health.2
And while many American households have racked up debt, they have not built sufficient savings. According to the latest data from the US Bureau of Economic Analysis, the personal savings rate in the United States is 5.7%. This means that out of every $100 in after-tax income Americans bring in, approximately $5.70 is being saved for things such as retirement, emergency expenses, and rainy-day savings. One in 3 Americans has $0 in retirement savings. Overall, about 50% of Americans are not saving adequately for retirement.3With these statistics, it’s not surprising that more than 60% of Americans report that money is their leading cause of stress.4
People’s financial stress is not confined to home: It inevitably spills into others areas of their lives. Personal financial stress manifests itself in many ways at work. Absenteeism, turnover, presenteeism, wage garnishments, employee theft, and 401(k) loans are just a few impacts connected to personal financial stress. Consequently, financial stress has direct negative effects on costs and profitability.5 To battle financial stress, an increasing number of companies are offering financial wellness as an employee benefit. Financial wellness programs can lower costs, reflect the employer’s genuine concern for the welfare of their employees, and are responsive to employee’s expectations for assistance from their employer.6
One such organization is Meredith Corporation, a media and marketing company in Des Moines, Iowa. Known best to consumers through such magazines as Better Homes & Gardens, PEOPLE, Parents, and SHAPE, Meredith Corporation has over 7000 employees across 25 locations. In 2006, then Chairman and CEO Steve Lacy established Meredith Wellness “to help our employees enjoy a long and healthy life, right now and during retirement.”7 From 2006 through 2009, Meredith focused on health and wellness (physical and emotional well-being), offering health screenings, fitness classes, and team challenges, among other activities. In 2010, Meredith worked with Iota, a financial wellness and employee benefits education provider, to design and implement a comprehensive financial wellness program.
A critical success factor in Meredith’s health and wellness program through 2010 was good data, which it obtained by having employees complete a Health Risk Assessment (HRA) and biometric screening. The HRA and biometric data allowed Meredith to identify specific behavioral interventions and track program outcomes at an aggregate level. Leveraging this experience, Meredith set the following 3 goals for its financial wellness program:
- Determine how employees were feeling about and performing with their money.
- Offer programming that would increase employee financial well-being.
- Measure behavioral gains (or losses) over time at the participant and aggregate levels.
The program components Meredith implemented to accomplish these goals included an assessment, risk stratification, onsite financial workshops, and financial coaching.
To determine how employees were feeling about and performing with their money, Meredith deployed a financial wellness assessment (FWA) in April 2010. As with its HRA, Meredith’s FWA was a self-reported instrument administered online to employees via Meredith’s wellness platform. Meredith’s original FWA measured 4 attributes: financial well-being, cash flow stress, savings rate, and employee benefits understanding. In its present configuration, Meredith’s FWA also provides measures in such areas as investing, retirement readiness, college planning, and general well-being.
To measure financial well-being, Meredith and Iota worked with Virginia Tech professor and Personal Finance Employee Education Fund founder Dr. E. Thomas Garman. Garman and his colleagues had developed the Personal Financial Wellness Scale (PFW).8 Derived from dozens of questions asked in many research studies conducted over almost 20 years, the PFW scale is an 8-item measure of the key outcomes of a single factor—financial distress/financial well-being. The PFW scale provides an accurate and reliable measure of the financial wellness with a Cronbach α reliability coefficient of 0.956.9Table 1 provides the framework for interpreting scores on the PFW. The average PFW score in the United States in 2013 was 5.2.10 According to John Hoffmire, the current average score in the United States is 5.82.
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