There is a significant difference between the wealth building and wealth transfer behaviors of different ethnic groups, according to a new report.
Those findings, drawn from an analysis of employees who participated in a workplace financial wellness program in 2016, indicate that these differences in financial behavior occur at each income level of the workforce and may be in part due to past and current socioeconomic factors.
The report, "Optimizing Financial Wellness for a Diverse Workforce," the latest study from workplace financial wellness firm Financial Finesse, notes that those differences do have a cost for employers: Employees with low or no assets, uncomfortable levels of debt and poor cash management behaviors – those with the lowest levels of financial wellness – cost employers an average of $94 to $198 annually. Moreover, a disproportionate number of employees in the “struggling" and “suffering” categories of financial wellness are from groups that exhibit the cycle of low financial wellness most frequently: African-American and Hispanic employees – even when controlling for age and income.
Ethnic Gaps
Financial Finesse looked at different ethnic groups by income using this definition to test their level of financial wellness and, in almost every area, found African-American and Hispanic employees to be the least financially well out of the four groups studied. For example, 25% of Hispanic employees and 31% of African-American employees reported high or overwhelming levels of financial stress – standing in sharp contrast to the 19% of white/Caucasian and 12% of Asian-American/Asian who felt that way.
More than a third (36%) of Hispanic employees and nearly half (48%) of African-American employees report not having a handle on cash flow. In contrast, just 18% of Asian-American/Asians and 23% of white/Caucasians reported that problem.
Consider too that while nearly three-quarters (72%) of Asian-Americans/Asians have an emergency fund, as do more than half (55%) of white/Caucasians, only 37% of Hispanic employees and a mere 26% of African-American employees do.
Among employees under age 30 who completed a financial wellness assessment in 2016, 6 in 10 (62%) cited getting out of debt as a main concern; but for Hispanic and African-American employees in this age group, the numbers were even higher: 70% and 80%, respectively.
Tips to Close the Gap(s)
The report offers some tips for helping to improve the financial wellness of these demographic groups.
Hispanics
- Developing targeted communication programs around the diversity of the Hispanic workforce. The report notes that offering materials in English and Spanish is a good start, but the communications must do more than simply translate words; they must translate meaning, thoughts and emotions behind the words to effectively engage Hispanic employees.
- Extending financial wellness benefits to family members. Hispanics are considered to be very family-oriented, and this orientation drives financial decisions, according to the report.
- Offering basic education on retirement planning and investing.
- Encouraging Spanish-speaking employees to include loved ones in workshops and one-on-one consultations.
African-Americans
- Providing trustworthy financial coaching and resources that are free of conflicts of interest.
- Closing the gap between perception and reality. The authors suggest that financial wellness programs should offer “reality checks” so that employees can evaluate the consequences of financial decisions before they are made.
- Offering multigenerational financial education programs. African-American employees have a desire to educate their children about money, so employers can capitalize on this by sponsoring educational events centered on educating children of different age groups about money.
- Enhancing benefit offerings and communications for caregivers. African-American employees, like Hispanic employees, are often called upon to be caregivers. The report notes that employers can assist employees that provide care to family by offering flexible work schedules, personal time off, insurance and long-term care benefits that extend to family members.
