With an economic environment that’s constantly changing, financial wellness is something that’s at the forefront of many American’s minds. In this episode, we’re joined by two members from our innovation team, Ashley Cader, Vice President of innovation, customer experience, and voice of the customer and Erin Melhuish, Innovation Consultant of the ideation team as we explore a 2019 study they performed as well as discuss:
AM-LAPFW-AUD001 6/23 Z01 LCN-5714371-060123
©2023 Lincoln National Corporation. All rights reserved.
With an economic environment that’s constantly changing, financial wellness is something that’s at the forefront of many American’s minds. In this episode, we’re joined by two members from our innovation team, Ashley Cader, Vice President of innovation, customer experience, and voice of the customer and Erin Melhuish, Innovation Consultant of the ideation team as we explore a 2019 study they performed as well as discuss:
AM-LAPFW-AUD001 6/23 Z01 LCN-5714371-060123
©2023 Lincoln National Corporation. All rights reserved.
Hello again, this is Chris Takesian Marketing Manager for leave and disability at Lincoln Financial Group. With an economic environment that's constantly changing, financial wellness is something that's at the forefront of many American's minds. But what exactly is financial wellness? Why is it important? Can it be built and how can employer offered benefits help? Joining me again to answer these questions are two of my colleagues from Lincoln Financial Group, Ashley Cader, Vice President of innovation, customer experience and voice of the customer and Erin Melhuish, innovation consultant of the ideation team. Hello again, Ashley and Erin. I'm so happy to have you both back.
Ashley Cader :Thanks for having us.
Erin Melhuish:Thanks, Chris. We're glad to be back.
Chris Takesian:So jumping right in, financial wellness is something that is certainly top of mind right now, you know, given our current economic environment, but prior to all this taking place with COVID-19, um, your team performed a financial wellness study. Could you talk a little bit about that study, what the goal was, you know, maybe some of your findings?
Ashley Cader :Sure. So financial wellness was growing in popularity back in 2019, but many of the solutions that were out there were really focused on retirement planning and how to save more for retirement, which both are very worthy goals, but there wasn't a lot of definition around other needs that individuals may have things like saving, managing debt, making financial decisions. And so on the innovation team, we sort of took a step back and said, the work that we do is focused on understanding individual's needs and desires, particularly the things that they can't articulate. So let's apply our innovation, you know, philosophy and our tool set and try and understand, you know, what is that deeper why? And so using observation, doing interviews, doing diary studies, we were able to really dig in and better understand what may be some additional opportunity areas in that financial wellness space that we could really build out, um, and really create a more holistic and comprehensive approach for individuals.
Erin Melhuish:Yeah. And to Ashley's point, I mean, one of the kind of high level goals of our study was to almost take a full step back or a leap back and really understand, you know, the term financial wellness was really coming to the forefront and we wanted to understand what does that mean for users? What is financial wellness? So, you know, as Ashley described kind of too true to our process, we asked users in varying geographic locations, across different industries and sectors, different ages, backgrounds, a wide array of financial statuses and situations, different education levels. And really what we found was super interesting that in individual's financial wellness and how they perceive that is almost as unique as their own fingerprint. Right? So while there may be some shared attributes across individuals, we really found that there's no one single profile. You know, it, it really surfaced as like a true juxtaposition to what we were seeing as an emerging trend in the market where, you know, a lot of financial institutions, financial services, um, and financial solutions we're trying to, in some ways, prescribe a financial wellness solution without really even understanding what does that mean to people? What are the varying factors that go into that before they, you know, would come up with a solution. So it was really insightful for us.
Chris Takesian:Yeah. And talking about, you know, uniqueness and I'm sure when you're thinking about the topic of financial wellness or financial preparedness, based on all the research you've done, it probably means something to you now. Um, you know, what, what does that phrase mean to you when we think about financial wellness or financial preparedness?
Ashley Cader :So, Chris, I think there's a couple of things that come to mind, at least for me, when, when defining financial wellness and really understanding that term, the first is that, you know, an individual can live day to day and manage all of their expenses. It also means that they're able to respond in case of a financial shock, something unexpected, like they're going to need new car tires that they weren't planning for. I might've said a pandemic, but I think that's a little bit more involved than, you know, traditionally deemed to be a financial shock, but it's things like that. They understand financial concepts, things like compounded interest APRs and debt mitigation techniques. Um, but most importantly in the one that I'm really passionate about is that they have the freedom to enjoy their life. So there's, um, the Consumer Finance Protection Bureau actually has a definition, um, that they use and I love it because it factors into human. Um, and it's, it's the many of the components that I just spoke about, but it's also that freedom to enjoy life. You know, many of us been have been told that we need to have emergency savings. We need to save for retirement. We need to keep that down and so on. And, and I think we all inherently know that we understand that, especially at a high level, but there are so few people that also tell us that we should be enjoying the fruits of our labor. And I think that's important because if all you do is work, then you're not really living. And so how we can have both pieces, um, I think is really important to a holistic financial wellness approach.
Chris Takesian:Especially now, you know, in researching this episode, a stat that really stood out to me, um, comes from a survey from the National Endowment of Financial Education. And it found that 88% of Americans are stressed about their finances right now, due to the COVID-19 situation. And with any type of stress, you know, there's going to be downstream impacts on one's personal life and potentially their work life as well. You know, can you talk about stress related to financial issues and why financial wellness is important from that aspect?
Ashley Cader :So we know mental wellbeing is very important, and I think you've actually covered that in a few of your yourself, Chris and stress is a very big contributor to the degradation of mental wellness. You know, when COVID first occurred, you know, I can recall the stress myself of that unknown. You know, when my family get the illness, when my husband or myself would lose our jobs, you know, how would we pay for the mortgage, all of those things that sort of run through your mind when dealing with that uncertainty. And I could feel the stress in my shoulders, the tension in my neck, you know, I may have started to stress bake and maybe eat, which wasn't really great for my body either. But you know, now imagine a situation in which you have less than$400 in savings. And that's actually the reality for almost 40% of Americans, according to a federal reserve study. And so one unplanned expense like car trouble, you know, not to even mention the pandemic, but someone could be in very serious trouble and was so many people really teetering on that precipice there's bound to be worries. And there's bound to be that, that mental stress. And then, you know, that physical reaction to feeling that stress.
Erin Melhuish:At the time of our study, which was pre COVID-19. We found that 64% of Americans would really be able to, um, would not be able to cover an a thousand dollar emergency without having to borrow money. And, you know, we did some research and according to a Bank Rate survey, um, 82% of employees didn't feel confident that they could, you know, cover their expenses if they were to suffer a major illness or an injury. So I'm not surprised by 88% of Americans feeling stressed about their finances right now, when we asked people, you know, if something were to happen to them, if they were to experience a quote unquote financial shock, and we asked them how they would react or respond, the results were kind of shocking to us. 70% said that they tap into savings or checking account. If it existed. 40% said that they would use a credit card to pay for their expenses. And 29% said that they would withdraw from their 401k, which we found was so interesting because if you add up the 40%, that would take the credit card route and the 29% that would tap into their 401k that's 69%. That's more than half of the population that we spoke to that would look for solutions that in fact would just be propelling them further into debt, um, when they're trying to get out of a bad financial situation. So it was really interesting to see, and it really surfaced for us like the need for education, the need for giving people options of how best to achieve financial wellness, whatever that may be, because it's so specific to them based on the financial situation that they're in today.
Chris Takesian:And you bring up a really good point, um, you know, withdrawing from retirement accounts or using credit cards. We saw some very similar parallels when experiences a disabling event, and there's a lack of disability insurance, you know, bringing it back to a previous episode we recorded. Um, we're seeing a lot of parallels in that as well. You know, as we discussed a little bit earlier, financial wellness is going to mean a lot of different things to different people, but maybe there are some common themes we can provide to the audience when thinking about building their own financial wellness or resiliency, if you will. I know in our pre-interview we talked about the concept of a financial go bag, um, and was wondering if you could, you know, share more about that with our audience, that, that idea that came up.
Ashley Cader :Yeah. So one of the interesting things Chris, that we do in the innovation space is analogous research. We'd like to look at other industries to get some inspiration. And so when we started to think about the concept of financial wellness and financial shocks, earthquake shocks came to mind, right? So how do you plan for something that's unexpected? What are other industries doing to sort of react to unexpected situations? And so we were able to go out to Western Massachusetts, which has the seismology department, um, and the team was able to spend the whole day there and really try and delve in and understand what it is that seismologists are doing. How do they plan for those shocks when they can't see them coming, particularly, you know, the first earthquake, if you will. And we introduced this concept to us of a, a go bag, you know, having this bag full of all of the particular things that they may need available to them.
Erin Melhuish:Yeah. One major learning that really resonated to us when we visited the West observatory and the way that they look at earthquake activity was that when it comes to earthquakes and also when it comes to financial shocks, you really can't predict them. But something that they taught us was because you can't predict them, then you should prepare. So the observatory has a list of items that should be packed in a, what they refer to as a, as a go bag. Um, so you're thinking about earthquakes. It's largely like a survival bag. They recommend that it lasts, you know, three weeks with all types of various items in there from food to first aid. But again, it has to fit into a backpack. And so from that, we thought, okay, well, if we were to apply this to a financial shock, what would need to be in a financial go-bag? So, you know, with all of our other findings in our research, we know that many people are faced with the challenges of living paycheck to paycheck. We know that, you know, having a fully prepared financial go-bag might be something, you know, that's not reasonable, but what we did kind of recommend and set forth was start somewhere, right? It's better to have something instead of nothing. So even if you are challenged and living paycheck to paycheck start small, you know, a dollar is more than nothing, put something into your savings, save what you can. You know, we also really found that education on the topic and learning through experience, um, was also something that was really important for people to be able to really read information, look for financial advice, that sound, and then also be able to say, okay, I can't save six months of my salary right now, but how could I apply this to my situation? Or what other financial tactics are people using? You know, a lot of people have cut the cord on cable. That's saving people so much money a month. You know, the little things like that, that really start to add up over time and can really get people into a better financial scenario.
Chris Takesian:Yeah. I just, I just loved that concept. I had never heard that. And I guess that, that's why you guys are on the innovation team, right. Going out and talking to seismologists. Definitely wouldn't be my first thought, but, but I, but I love it. So, so to build this wellness, you know, you talked about the financial go bag, but sometimes the first step is assessing one's current financial situation or financial wellness. How might somebody go about doing this who might not have as much experience in that area?
Ashley Cader :So that's a great question, Chris. And what I would advise is that a lot of, um, start with your employer. So a lot of employers are starting to offer financial wellness solutions, whether it's an online tool where you can take an assessment and then get personalized advice on sort of what you could tackle next, or even meeting with a financial advisor for more one-on-one advice. But then, you know, outside of the employer arena, there's also a number of free public options. There are financial health calculators on websites like CNN Money and AARP, and there's even community programs. Um, New York public library actually has a financial literacy central and they host programs, they post things online, there's books that they advocate that you can take out, um, a whole host of free resources available for citizens so that they can dig in and better understand what the financial literacy aspect and then how to apply that to their own life so that they can achieve the wellness.
Chris Takesian:Oh, that's great. I actually didn't realize that. So I'm definitely going to be checking those out after, after our talk here, but what about life events? You know, let's say purchasing a new home or having a baby, should those play a role in how you are when you have an assessment?
Ashley Cader :I would say absolutely. Life events can be these huge milestones. Um, you know, something that's really exciting for you, but they also introduce more financial complexity. You know, a new home is going to have its own specific challenges. There's the mortgage, right. But there's also the maintenance and the upkeep. Um, and there's no one on the line, you know, at three o'clock in the morning when the water heater decides to stop working, right. Or if the sub pumps flooding. And so those are things that you sort of have to prepare for a new baby, you know, means the added expenses of diapers and formula, not to mention the healthcare costs like the cost of delivery and eventually, you know, childcare and education. And, you know, I remember back when we were expecting, um, when we found out that we were expecting twins, we about hit the floor. I mean, all the words that you would think about, you know, how are we gonna afford two babies instead of one? And then I've been really recall just feeling the stress, like all my chest, you know, freaking out. And so I created a spreadsheet of all of our expenses and income so that I could just try and play out the things that were running through my head and say, okay, what does this really look like? Because I was so stressed, I was basically paralyzed. And then I ended up having the twins, um, super early. They were 10 weeks early. So then we were confronted with the NICU bills that we had never planned for. Hadn't anticipated that at all. And so eight weeks in the NICU for each baby, that's about a million dollars for each thing for the cost. Right? So you see these numbers coming in and thank God that we had insurance. If we didn't have health insurance, it would have been devastating to us. So I think that it's, you know, these, these life events are so important, but you have to think about both the things that you can plan for. And then frankly, and I didn't do this well, but think about those unknowns and try to put some boxes around it, to the extent you can so that you can have that, that backup, that errands, we're talking about the couple extra months of expenses in your savings so that you can respond, um, for that unknown.
Chris Takesian:Yeah, absolutely. And you really transitioned well into my, my next question. Um, and it is, you know, I'd be remiss We work for an insurance company. And what about insurance? You know, do we want to be thinking about those terms? I know you mentioned health insurance, but do we want to be assessing those insurance coverage for potential gaps as a need as well when looking at our financial situation?
Ashley Cader :Yes, definitely. And I actually find that many people typically separate finances from insurance and really shouldn't, right? Insurance protection is just another lever that you can pull to ensure financial health. So if we go back to my NICU example, I did mention health insurance to your point. Um, and without that we would have been bankrupt. Um, but then I think, you know, there are other types of insurance that can step in and also help make you whole. So disability insurance is, you know, that's what one of the products, right that our, our organization offers, but that enabled me to recover and still have income to pay the deductibles and pay the coinsurance expenses that came with my healthcare as well as continued to, you know, help fund the mortgage and things of that nature. So, you know, factoring in how health insurance can support your financial wellness is really important.
Erin Melhuish:I think, you know, understanding how insurance coverage can really supplement, uh, and in some ways compliment your financial tools that you're leveraging. I think it's a great opportunity for anyone to, you know, continue to educate themselves on this topic and how insurance can really serve as that financial wellness vehicle. I know that probably on the majority of employer sites, you could go out and every year we elect benefits. Typically it's done at open enrollment in the October timeframe for many and outside of that, you can't really change your benefits unless you have a life event. So I would first start there, look at what's classified as a life event and keep those in mind. Keep in mind that as you get married to Ashley's point, as you have children, um, if you were to have a divorce, if someone were to lose a job, um, you know, your spouse or partner children going off to college, like these are all major life events and there's opportunity that's associated with each of them. If you were to experience one of those events, you'd be able to go in and change your benefit elections outside of open enrollment, uh, in the majority of those scenarios. And so I think it's just understanding what some of those major milestones are in life and how you can use insurance to really serve as a financial vehicle to help support them. I can say from firsthand experience, I'm a little on the clumsy side. Um, I happen to have accident insurance and I really purchased it or, you know, subscribed to it through my employer because I've got two kids, both are super active in sports. My son plays hockey and I thought we are just rot for injury and ended up being me who ended up using it last year, I fell in a in a hole and tore my Achilles and have regular. I know I have regular health insurance coverage, but the accident insurance really surprised me. It really offset, you know, my overall out of pocket expenses related to my injury. So I hadn't heard of it before, but somebody had told me they purchased it because their kids were active in sports. And I thought, Oh, well, that would apply to me. So it's really, you know, understanding what's out there for tools and options that might help make you whole in a scenario where you're paying out a significant amount of money.
Chris Takesian:Right. And now's the time a lot of us are working from home. We might have some more downtime than usual. Take that time to go out and do that research on your own. You know, don't put it off. It seems like something, you know, the internet is at our fingertips and we should use it to make sure, you know, we're, we're staying prepared, we're staying vigilant, um, and, and advocating for ourselves.
Erin Melhuish:I also think too Chris, I mean, it's accepting the fact that we're all human, right? No, one's impervious to illness or injury, unfortunately. And I'd say, you know, it's important to know what benefits are offered to you and understand what they mean. So, you know, if you think about it, if you say to someone, do you have disability insurance? And they're like, no, I don't. I don't think I need that. Well, disability insurance is really there to help supplement income. If you are a suffering illness or an injury that really prevents you from working. So again, while it may not be viewed as like an obvious financial vehicle, it's there to help keep a salary coming in, you know, keeping you as whole as possible in a time where you're unable to work. And you really need to be focusing on getting better, either for you or for a loved one. And life insurance is another one, right? So, you know, we think of, you know, people think, yep, I'll get some life insurance. Maybe I only need a little bit, but I would stress to people, the importance of life insurance that it's not necessarily for you. Life insurance is really there to serve as peace of mind for your beneficiaries. Oftentimes one significant other or children are the ones who benefit from that in the event that someone was to pass. And it's there to be a safety net to help ease or eliminate that worry of finances when someone has lost someone significant in their life. And they're trying to navigate the day to day while grieving having financial stress on top of that is something that could be eliminated by having a solid life insurance policy in place.
Chris Takesian:Definitely. And you bring up a good point. I mean, a lot of us don't take the time to look into what benefits are available, but are there ways that employers can stay connected with their employees? You know, maybe some resources, especially given now that, you know, this could be something that's top of mind where they can point their employees to say here, let me help you find the coverage. That's right for you. Let me help you with your financial stress. Um, are there other ways that employers can do that?
Ashley Cader :Yeah Chris, we mentioned right. That many employers have financial wellness programs today, and that's a great place to start, you know, arming yourself with these tangible and tactical ways that you can start to align your financial health, I think is really great. Um, and oftentimes, you know, that may help reduce some of the stress because you have a plan and you understand what your path is going to be moving forward. However, you know, we discussed that stress can be very harmful to your mental health. So tackling that aspect of your wellbeing, I think is important too. And again, employers actually have programs for that. They're called employee assistance programs or EAP's for short, in case you've heard of those, but they're offered by many employers, um, and they have resources to help. So, you know, oftentimes we don't necessarily think of the employer maybe as the first place to go, Google maybe, but, um, you know, checking in with your employers, seeing what is offered through them first is a really good way of sort of setting yourself on the right path. Um, figuring out what's out there and then building upon that and supplementing it as you may need.
Erin Melhuish:And I think one important thing that we learned throughout all of our research is that you can't have wealth without your health. Um, and employers are recognizing that they want their employees to be whole, they want them to be quote unquote healthy. And if finances are a part of that, that's why they're offering, you know, these types of, of EAP services. It helps not only the employee, um, you know, be healthier overall. It also helps them be more productive at work, right? So there's a benefit to all by really exploring what some of these tools are and some of the things that are available to employees when they're struggling.
Chris Takesian:For sure. And another thing I'll go onto your point. Um, you know, EAP has a lot of it's there they're confidential, right? So when we're talking about finance and we're talking about some of those personal issues, it's, it's confidential with that. It's so like you said, somebody might not think to go to their employer first, but when you're working with the EAP, it's totally personalized to you. And I think that that's, that's an important thing to note. Well with, with that. Um, I think we'll wrap, but again, it was a pleasure, truly a pleasure having you both back on. I hope that there's going to be a third time.
Ashley Cader :Thanks Chris.
Chris Takesian:To everyone listening. Thank you for joining us. We will continue to cover topics that help employers and their employees to this new environment. So be sure to subscribe to Lincoln Absence Advisor on Apple, Spotify, or wherever you get your podcasts,
Disclosure:The information contained in this podcast is for general use and is not a substitute for the advice of an attorney or your human resource professional. Lincoln Financial Group is the marketing name for Lincoln national corporation and its affiliates. Affiliates are separately responsible for their own financial and contractual obligations.