A Time to Save
Alison Cooke Mintzer (photo by Chris Ramirez)
It’s shocking, from a workforce perspective, what has happened in less than three months of the COVID-19 shutdown: Work from home is now the norm for many Americans—with some high-profile companies saying their employees might be able to work remotely permanently; the phrase “essential worker” has entered our lexicon, involving a large swath of employees across the pay and skill spectrum. Not to mention that over 40 million Americans have filed for unemployment, and, as of this writing, we have seen 10 straight weeks with millions of claims. Until this year, our country had never seen a weekly figure of even 1 million. And millions of self-employed Americans such as freelancers, who wouldn’t normally qualify for unemployment benefits, are filing for “pandemic unemployment assistance” to get financial aid.
These numbers are simply staggering, though the last released figure for May shows a decline in continued claims—i.e., the number of people claiming regular unemployment benefits for consecutive weeks. Like so much else lately, it’s unclear if that signals revitalization of the labor market or is simply a blip on the chart.
In the midst of all of this, Americans’ concerns about the economy are also apparent, reflected in their spending and saving behaviors. For example, the Bureau of Economic Analysis reported at the end of April a 5-percentage-point increase in the American savings rate—from 8% in February to 13.1% in March. I think it’s worth noting, this was the highest savings rate recorded since November 1981.
This figure is a double-edged sword in that, for the economy to recover, for the unemployed to go back to work, Americans need to be spending. However, for all of us in this industry that prioritizes saving, planning and financial wellness, this is also an opportunity.
Sadly, unemployment has hit one in four workers. Even if your clients aren’t laying people off, the crisis likely has affected many of their workers’ households. Issues of financial wellness are top of mind for so many—what can they afford, what should they spend on, where do they need to cut back, for how long will their paychecks keep coming?
For advisers, this may be the time to communicate with your plan sponsor clients and their employees—not just participants—about financial wellness and some of the myriad topics that includes. It seems contrarian to be thinking about reminding people to sock money away and stay the course. But, as spending drops—7.5% in April, noted the Bureau of Economic Analysis—Americans who are still employed can, and likely should, save that money.
Perhaps we should be broadly discussing how to help people establish the emergency account they always knew they needed. I’ll acknowledge this ignores a great many others who also need help—people who were laid off or furloughed, who work at a company without a plan, but I don’t have ideas for how to help them; however, I’d love to hear ideas from anyone who does.
At a time when stores are closed and people can’t be out spending, when they may be reordering their life priorities (but that’s a topic for another day), they may be thinking about the importance of financial security in uncertain times. The small part that you—and our industry—can play in creating and distributing communications that can help them achieve this might well be welcome.