Einat Steklov is the co-CEO and co-founder of Kashable, a financial wellness company revolutionizing how employees access low-cost credit.
Responsible borrowing is essential for maintaining financial stability. As household debt reaches record levels, individuals must make informed financial decisions that balance short-term needs with long-term security.
According to the Federal Reserve Bank of New York, total U.S. household debt surpassed $17.5 trillion in 2023, with credit card balances exceeding $1.13 trillion. This growing reliance on credit underscores the need for greater financial education and responsible credit use to protect long-term financial well-being.
This is an important issue for business leaders in the financial sector and beyond. For those in financial services, rising consumer debt and delinquency rates can impact lending portfolios, increase default risk and reduce profitability.
More broadly, leaders across all industries face a workforce under financial stress, which can lead to burnout, disengagement and higher turnover—harming productivity and increasing talent acquisition costs. Promoting financial education, responsible borrowing and low-cost credit access can foster stability, satisfaction and a stronger, more resilient economy.
The Rising Debt Crisis
Young adults are facing increasing financial pressure as credit card debt continues to rise. According to the Federal Reserve Bank of Philadelphia, minimum credit card payments have reached record highs, making it harder for borrowers to manage their balances. Delinquency rates are also climbing, with a growing number of consumers struggling to keep up with their financial obligations.
In the third quarter of 2024, 10.75% of active credit card holders made only minimum payments, reflecting the increasing number of individuals unable to pay down their balances. With interest rates remaining elevated, carrying a credit card balance has become even more costly, exacerbating financial hardship.
Beyond consumer debt, a record 3.6% of 401(k) participants with Vanguard Group withdrew funds early in 2023. While these withdrawals may offer short-term relief, they come with penalties and taxes and can significantly erode long-term financial security or even one’s ability to retire at the desired age. This trend highlights deeper challenges in managing debt and planning for the future.
For businesses, this escalating crisis can dampen consumer spending and strain overall economic growth. Nowadays, forward-thinking organizations are beginning to recognize that financial health is often tied to workforce productivity and are proactively addressing these issues through targeted financial wellness initiatives.
Consumer Protections And Regulatory Uncertainty
Consumers often rely on regulatory protections to ensure fair lending practices. However, recent administrative changes at the Consumer Financial Protection Bureau (CFPB) have changed consumer protection laws, creating uncertainty for Americans.
Without active oversight, consumers—particularly those with lower credit scores or limited access to traditional banking—could face increased financial risks. This uncertainty reinforces the need for financial literacy programs, employer-driven wellness initiatives and responsible lending solutions to bridge the gap left by regulatory setbacks.
The Consequences Of Poor Borrowing Decisions
High-interest debt can lead to long-term financial instability. Borrowers should fully understand the risks, including high fees, compounding interest and potential credit score impacts.
Many consumers rely on credit cards for unexpected expenses, but without proper planning, this can result in unmanageable balances that make even minimum payments challenging. Financial literacy is key to preventing debt cycles. A 2024 report from the CFPB found that the percentage of families struggling to pay bills or expenses increased from 38% in 2023 to 43% in 2024. These findings highlight the need for financial education and proactive policy measures to protect consumers.
Borrowing Responsibly And Financial Literacy
Responsible borrowing involves adopting key financial behaviors:
• Understanding loan terms: This involves reviewing interest rates, repayment periods and potential fees before borrowing.
• Prioritizing low-cost credit options: Choosing loans with lower interest rates and structured repayment plans can help people manage debt effectively.
• Avoiding high-cost borrowing: This means steering clear of high-interest credit cards and payday loans that can lead to long-term financial hardship.
Employers are well positioned to promote financial literacy and responsible borrowing among their employees. A PwC Employee Financial Wellness Survey found “Among financially stressed employees who are distracted at work because of their finances, 56% spend three hours or more per week at work dealing with or thinking about issues related to their personal finances.”
To support employees effectively, companies should first assess their workforce’s financial pain points, such as budgeting, saving or managing debt. My company’s State of Consumer Finance Report found that 81% of employees prioritize paying off debt.
Financial wellness tools and coaching can help at scale, offering on-demand support, budgeting workshops and interactive tools on credit, savings, and borrowing. Embedding financial education into employee benefits—such as access to low-cost credit with repayment guidance—can be a highly effective strategy for long-term financial stability.
The Role Of Employers In Financial Wellness
Employers have an opportunity to support their workforce by offering financial wellness programs, including:
• Employer-sponsored loan benefit programs: You may want to provide access to low-cost credit repaid through payroll as a responsible alternative to high-interest credit. (Disclosure: My company helps with this, as do others.)
• Credit-building programs: Incorporating alternative credit data, such as employment, rent and utility payments, can help employees improve their credit scores.
• Financial counseling services: Consider offering employees access to financial advisors to develop debt repayment strategies and avoid costly financial mistakes.
Employers can also consider incorporating financial wellness programs that include a liquidity provider in addition to educational tools, ensuring employees have access to immediate financial resources while also receiving long-term financial guidance. A holistic approach that combines liquidity solutions with financial education can help employees manage short-term cash flow needs without resorting to high-cost borrowing.
When choosing financial wellness programs, leaders should consider employee demographics and financial stress indicators. Surveys can help tailor solutions, while employer-sponsored resources support financial goals in and out of work.
To overcome challenges like low awareness or skepticism, I recommend companies position financial wellness as essential to employee well-being. Integrating it into HR and benefits communications can help ensure accessibility and effectiveness.
Building Long-Term Financial Health
Responsible borrowing is a cornerstone of financial stability. When individuals make informed decisions, avoid high-interest debt and prioritize long-term financial planning, they can often achieve greater financial security. Employers, financial institutions and policymakers can work together to ensure consumers and employees have access to fair and transparent borrowing options.
Through education, employer support and responsible borrowing habits, Americans can build a more secure financial future.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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