The Toll of Financial Stress in the Workplace

Employee Benefits

The Toll of Financial Stress in the Workplace

Life is harder for low-income workers with children than for empty-nesters in the executive suite, a new survey says. Companies can increase productivity with financial education and training.

Although the recession is easing, financial stress remains a major worry in the workplace, according to a new study from Financial Finesse, a company that provides financial education and wellness programs to corporations as an employee benefit. Two-thirds, or 67%, of workers surveyed reported some degree of financial stress in their lives, and 16% reported high or overwhelming financial stress in the first quarter of 2013. The poll surveyed 12,000 people and has a 2% margin of error.

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The study identified four major causes of stress. For those who report high financial stress, 66% said they were stressed out by their day-to-day personal finances, while 60% expressed concern about meeting future financial goals. In contrast, those with less financial stress were more concerned about the larger economy. And up to 27% employees cited the question of who to trust with personal investing decisions as a cause of stress.

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The study found red lights still blinking in some key demographics. Women age 30 to 44 with household income below $60,000 and dependent children were identified as the most worried group. They were nine times more likely to report experiencing high financial stress than men age 55 to 64 with no dependents and household income over $100,000.

Women were twice as likely as men to report having high or overwhelming financial stress. And people raising children were twice as likely to have overwhelming financial stress as those without children.


The survey found stark contrasts between low-income and high-income employees. Those with income between $20,000 and $34,999 were nearly ten times more likely to report high or overwhelming stress than those who earn $200,000 or more.

A recent IBD/TIPP Financial Related Stress Index, based on a poll of 858 people and published by Investor’s Business Daily, reinforced the finding. For those making less than $30,000, the stress index climbed 3.3 points to 64.3 in May, the highest in eight months. The IBD survey found high earners, by contrast, reported less stress and more optimism about the overall economy.

Liz Davidson, CEO and founder of El Segundo (Cal.)-based Financial Finesse, said such disparities in outlook slowly close as low-income employees create an ongoing habit of good money management and their savings accumulates. Over the long term, as employees become more financially savvy and the U.S. economy improves, stress levels tend to go down.

Davidson said that higher health expenses, higher turnover, absenteeism, and drops in productivity can create significant costs for companies that have a large percentage of employees in vulnerable demographics. She cited a 2010 Federal Reserve study that employee financial stress costs employers an average of $5,000 per employee per year in lost productivity.

Companies should look at the demographics of their workforce to gauge the impact of financial stress, Davidson says. She suggests paying attention to “warning signs” such as a high percentage of 401(k) plan loans and hardship withdrawals, garnishments and pay advances. The study found that 51% of employees with overwhelming financial stress have taken a loan or hardship withdrawal from their 401(k) plan. Any withdrawal of more than 25% should be considered problematic, according to calculations provided by Chepenik Financial, a retirement plan advisory firm.


In 2007, the Aetna retirement and financial benefits team noticed a rising number of calls to the 401(k) retirement plan center, mostly inquiries about withdrawing money from retirement funds for immediate use. Aetna brought in Financial Finesse to launch its financial wellness program in late 2007. The program now provides workers with one-on-one consultations with financial planners from Financial Finesse, and retirement education specialists from Aon Hewitt, a provider of risk management, insurance services and human resources help. The program also provides workshops and live interactive webcasts on financial topics.

Other providers of financial education programs include CLC, the EDSA Group, Heartland Institute, Money Management International and Stacey Braun Associates.

Carol Klusek, head of retirement and financial benefits at Aetna, said 91% of workers who have participated in the program now say they have a better handle on their cash flow; 100% contribute to the company’s 401(k); and 47% say they are on target to replace at least 80% of their income in retirement.

Greg Ward, director of Financial Finesse’s certified financial planner program, added that programs focusing on basic money-management skills would best serve employers with high levels of employee financial stress, while employers with low levels of employee financial stress could use investment planning to help employees grow their wealth.