App / Software

The Power of Early Pay: Transforming Your Financial Future

Changing a person’s money mindset is essential to achieving financial wellness. However, early wage access programs that charge fees may contribute to workers’ reliance on advances instead of helping them build savings and other emergency funds.

Increased Cash Flow

Over the years, direct deposit has become a popular way to get paid since it’s quicker, more convenient, and typically unlocks extra perks with your bank. But how fast those ACH funds appear in your account depends on when the payor submits them, and often, there’s a delay between when they arrive at the bank and when they’re made available to you.

Early direct deposit offers a potential solution to this issue by allowing you to access your paycheck up to two days before your scheduled payday.

Early pay could help you make essential bills or payments on time, potentially staving off late fees and other financial penalties. It also allows you to put more of your income into savings or even take that extra cash and treat yourself to something special.

Increased Savings

One of the best things you can do for your financial future is to start saving money. But it can be challenging if you’re living paycheck to paycheck. That’s why it may be worth fighting for a wage increase or a higher-paying job. Getting your paychecks one or two days earlier can allow you to save money for emergencies or even invest in a high-yield savings account that earns interest. Prompt payment of supplier invoices can strengthen supplier relationships, potentially leading to preferential terms or access to limited stock. This can help lower procurement costs. It can also improve cash flow by reducing the need for external financing. Early pay can also help you get your federal tax refund up to 5 days early, so you don’t have to wait as long to see the return on your hard-earned dollars. 

Boosted Self-Esteem

The pain experienced by workers waiting for their paychecks has prompted solutions that range from cash advance providers to online budgeting and savings apps. But, as a recent American Banker article points out, these early access programs can build reliance on advanced pay and may not add up to true financial wellness.

Offering these benefits with other tools that help people stay on top of their expenses can make the most difference. For example, a known company reportedly found that employees who used the company’s EWA program in conjunction with other in-app features, such as bill autopay, tended to stay with the company longer than those who only took advantage of the fast pay option.

For many, boosting self-esteem is a long-term goal that requires daily practice. There are many ways to do that, including volunteering or spending time in nature. Other options include:

  • Finding a hobby.
  • Learning a new skill.
  • Appreciating others for their good qualities rather than their bank balance.

The more a person feels valued and worthwhile, the better they will feel about themselves – regardless of how much money they have in the bank.

Reduced Stress

The ripple effects of financial stress can be toxic to your physical and mental well-being. The good news is that it’s possible to reduce stress levels by living within a budget, consolidating debt with lower interest rates, or curbing unnecessary spending. But it can be challenging to make these changes if you’re struggling to make ends meet.

That’s where early wage access (EWA) programs can help. EWA providers link to employers’ payroll and time-and-attendance systems to advance employees a portion of their wages before payday. The employer then reimburses the on-demand pay provider at the end of the pay cycle. This model is less expensive for employers and more effective than direct-to-consumer daily payment products that function like loans.

Employees use EWA for various reasons, from paying surprise bills to balancing cash flow to covering living expenses. Some employees who use EWA, financial planning, and savings tools report improved financial stability and less reliance on costly alternatives like payday loans, credit card debt, or steep bank overdraft fees.

Boosted Confidence

Getting access to paychecks up to two days in advance can help people make smart financial decisions. For example, the money they can save by using an application or bank can reduce their reliance on expensive payday loans and credit cards, which can damage a person’s credit score.

A new poll finds that adults who are confident in making their own finance-related decisions report having savings (46%), having a budget or strategy in place (35%), and managing debt successfully (27%). American adults who say they are not confident in their finances report the top reasons as not having an emergency savings fund (35%), not having a budget or strategy in place (30%), and having difficulty with the management of their debt (31%).

HR managers who offer early wage access programs can help workers build financial confidence by providing accessible, affordable educational opportunities. Financial education can increase confidence, but it’s even more effective when combined with hands-on experience, like the opportunity to practice the skills taught. 

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