Many Americans struggle to stay on top of debts with every paycheck, but there is help available
Imagine this: According to the annual Survey of Household Economics and Decisionmaking, conducted by the Federal Reserve Board, 4 in 10 American adults cannot cover an unexpected $400 expense without selling something or borrowing money.
To learn more about how employees are utilizing their paychecks and in conjunction with National Payroll Week (September 3-7), QuickBooks Payroll surveyed 1,000 American workers, and this is what the data says.*
Hero to Zero
For 1 in 5 respondents, payday means paying off debt. In 2017, the total household debt hit a new high of $13 trillion, surpassing the previous record set in 2008. Living paycheck to paycheck means that many working Americans have little choice but to turn to costly ways to get money, from payday loans to credit cards. The Federal Reserve’s latest report also broke down the overall average debt by age group:
Running on empty
Twenty percent of respondents from the QuickBooks Payroll survey say they typically spend their entire paycheck the same day they receive it, leaving them high and dry until the next payday. In fact, half of the respondents say their savings wouldn’t last a month if they were to lose their job. Perhaps it’s not surprising that 4 out of 5 employees (80 percent) feel they are not saving enough to retire.
Help is available
From Walmart to fried chicken restaurants, companies of all sizes are stepping up to the plate to provide relief. Henry Loving owns Lee’s Famous Recipe Chicken in Richmond, Virginia, and he began noticing how many of his workers were drowning in debts.
“You know, a lot of times the folks that I have working for me are tight on money and they’ll go out and do payday loans or something like that,” Loving said in an NPR interview. “And by the time I get wind of it, it’s too late and they’re in all kinds of extra hard trouble trying to get that paid off.” So Loving employed the help of a financial wellness platform to get his employees advance pay for a very small fee in-between paydays.
The technology is here
Unlike a loan, a paycheck advance pays an employee for the hours they have already worked and merely issues payment before the regular payday, making it less risky and easier to manage.
Accounting and payroll software solutions like QuickBooks already have built-in advance pay set up to make the process nothing more than a few quick clicks. What’s great is that, with QuickBooks, paying all or part of your employee’s wages in advance does not change the way taxes or deductions are calculated.
Taking a stand to alleviate your employee’s financial well-being can ultimately benefit the business by improving retention and productivity, which is definitely a move in the right direction.
*Methodology: In 2018, QuickBooks Payroll commissioned Pollfish to survey 1,000 employees (age 18+) from businesses throughout the US about their payday experiences.