Employees less confident about finances than business owners

While both employers’ and employees’ top concerns include rising costs and macroeconomic challenges, employers feel more satisfied with their businesses’ financial situation than employees do about their personal finances, according to the latest Principal Financial Well-Being Index.

As employer sentiment and business health remain steady, there are opportunities for employers to support their employees’ financial health, according to the study.

Although employees and employers largely report they’re able to meet their respective financial obligations, that doesn’t translate into workers feeling as satisfied with their current financial situation, the survey said.

In fact, only 34% of employees are “always” or “often” satisfied with their personal finances, compared to more than 70% of employers who are “always” or “often” satisfied with their business’ finances. Also, nearly two thirds of employees wouldn’t be able to cover expenses for longer than three months if they were to lose their main source of income.

When examining this trend based on demographic differences, over half (55%) of Gen Z and 44% of millennial employees wouldn’t be able to cover expenses after the first month without their main source of income. Additionally, women are more likely to say that they couldn’t cover expenses for more than one week, while men are more likely to say they’d be able to cover expenses for six months or more.

Meanwhile, businesses are growing

While workers’ sentiment remains low, the same cannot be said of their employers. In fact, despite persistent concerns about inflation and the stability of the U.S. economy, employer sentiment remains high, the survey said.

More businesses are currently growing than at this time last year (64% vs. 52%). Small businesses1 also reported year-over-year increases in growth (58% vs. 46%). However, while most businesses report growth, they’re less optimistic about the overall growth of the U.S. economy.

“Small businesses continue to demonstrate positive sentiment and steady cash flow,” said Amy Friedrich, president, benefits and protection at Principal. “However, when you move beyond their specific business or region, employers are less confident about the broader economy.”
So why are businesses feeling more optimistic than their employees? “Our research showed us that businesses can rely on their steady cash flow and cash on hand in the event of an emergency, as more than half of businesses said they would be able to cover basic expenses for more than three to 12 months before borrowing money,” explained Friedrich.

“Meanwhile, nearly two-thirds of employees wouldn’t be able to cover expenses for more than three months if they lost their main source of income, and in the event of an emergency only 59% of employees can go to their checking or savings account. Each wave of the Principal Financial Well-Being IndexSM has shown us steady growth from businesses despite continuous economic challenges. However, the latest data reveals the economic environment has caused a rift in business owners and employees’ future outlooks, with employees feeling less confident about their financial situation than business owners, and cash on hand could be one factor.”

Passing on financial optimism

As business owners continue to see growth, there are ways to provide greater support and pass that optimism on to their employees, Friedrich said. Employers can boost employees’ financial security through financial-wellness tools and holistic benefits packages that meet their employees’ needs. These benefits packages could include income protection products like short- or long-term disability income insurance, retirement savings programs, or financial literacy education.

“Providing this level of support can be a key differentiator for employers, helping them retain talent, while also improving overall financial inclusion,” he said.
The survey also found that the more optimistic a business is about the next 12 months, the more likely it is to add certain benefits such as critical illness insurance, childcare support, financial-wellness programs, and Employee Assistance Programs (EAPs).

Financial-wellness programs employees want

Financial-wellness programs are expected to emerge as an additional plan resource to further personalize the employee experience,2 the survey pointed out.
Apart from retirement-savings programs, top financial-wellness benefits that small businesses believe should be offered include:

Helping employees establish a budget and a plan
Retirement-income planning
Investment education

These benefits are key to boosting how secure employees feel across life and work, the survey said.

All survey results and insights can be found at the latest Principal Financial Well-Being IndexSM (PDF).

The Principal Financial Well-Being Index surveys business owners, decision makers and business leaders aged 21 and over who work at companies with  2 to 10,000 employees. The nationwide survey examines the financial well-being of American workers and business employers.

The survey was commissioned by Principal and conducted online by Dynata from June 5-12, 2023, with a total of 500 business owners, decision makers and business leader participants and a total of 200 employee participants.

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at amseka@INNfeedback.com. 

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