Unexpected expenses and how to pay for them are a continuing challenge for many employees. With so many workers living paycheck-to-paycheck and with little or no savings, it’s a struggle to handle unexpected expenses that occur. The impact of the COVID-19 pandemic has made employees’ financial issues even worse.
Here’s a snapshot of unexpected expenses that employees were experiencing prior to the pandemic this year. Results of a survey conducted by The Harris Poll on behalf of Purchasing Power® in December 2019 among 807 U.S. adults who are employed full-time revealed that 83 percent had an unexpected expense in the past 12 months (January – December 2019).
It’s interesting to look at the household income ranges for those who had unexpected expenses. Surprisingly, the higher the household income, the more likely the employee was to have an unexpected expense:
• less than $50,000 – 76 percent
• $50,000 - $74,999 – 80 percent
• $75,000 - $99,999 – 84 percent
• $100,000 – 86 percent
Employees also were asked to identify the unexpected expenses that they incurred. According to the survey, those were:
• vehicle repair/replacement – 48 percent
• medical costs like a sudden illness or increase in cost due to pre-existing conditions -- 35 percent
• travel for things such as a funeral, sick relative or unexpected move – 28 percent
• replacing or upgrading a major home appliance that stopped working – 28 percent
• home repairs – 27 percent
Paying for those unexpected expenses can send those living paycheck-to-paycheck further into debt. According to the same Harris Poll survey, those who had unexpected expenses during those 12 months covered the costs with a credit card (41% percent); cash (37 percent); money that was earmarked for other household bills (24 percent); money from their emergency fund (23 percent); a payday, title or home equity loan that they specifically took out for this unexpected expense (16 percent); by selling something such as jewelry, electronics or a car (15 percent); by borrowing from friends or family (15 percent); or by borrowing from their retirement savings (12 percent).
Inevitably, an unexpected expenses are going to occur. This is life, right? Situations are going to occur but they become insurmountable obstacles when financial resources aren’t available to make better choices. And then factor in a corona pandemic on top of that.
There’s no question that COVID-19 has thrown a curve ball into our entire lives and our financial circumstances. The “new normal” from the effect COVID-19 is having on jobs and the economy has created even more financial stress. Employees are worried more than ever about money. In fact, Americans are more worried about unexpected expenses (79 percent) and paying their bills (68 percent) than they were about catching COVID-19 (63 percent).
Voluntary benefits that are part of the overall employee benefits program can be a smart alternative for covering unexpected expenses. Often, employees aren’t aware some of these benefits exist because it wasn’t something they needed in the past. This is a good time for benefit communications about options in the employee benefits plan that might be helpful during this time.
Our employee purchase program is one of the voluntary benefits that could be an option now for unexpected expenses. It allows workers to purchase consumer products and services through payroll deduction when they are unable or prefer not to use cash or credit. The program is an alternative to high interest credit cards and other sub-prime financing options for customers desiring to pay for a purchase over time.
Other voluntary benefits in the marketplace include low interest installment loans and credit that help employees avoid payday loans and cash advances from credit cards; student loan repayment benefit programs in which employers are making contributions to loan balances or providing methods for employees to refinance their debt and bill payment programs that empower employees with debt paydown strategies and the ability to make recurring bill payments on-time each month through payroll deduction.
Check out this Employee Benefit News article on How voluntary benefits can address the financial hardship of coronavirus online.