Have you heard about on-demand pay benefits, also called early wage access?
One of the most common questions we get is, “Doesn’t more frequent pay encourage bad spending habits?”
In theory, it could…but that’s not usually what happens.
Think about daily pay apps or on-demand pay like an ATM. Just because all your money is in your bank account, doesn’t mean you’re going to spend it all in one day, right? Some people with really bad spending habits might, but most people are going to have some sort of restraint.
Instead, having the freedom to access wages any day can result in stronger financial wellness. Here’s why.
Daily pay or on-demand pay from Rain gives people the option to develop stronger budgeting skills. When you’re only getting paid every other week (or even less often), it can be hard to visualize how long you need to make each paycheck last. You may forget to leave room for emergencies, or you may forget about a bill that only comes once per quarter. When you have instant access to your earned wages, budgeting is much less of a problem.
For example, if you have a prescription that you only pick up every three months, you might forget to add it to your monthly budget. If you have instant access to your wages, you can log into your account and withdraw the money you need for your prescription right when you need to pick it up, instead of adding that cost to your pile of debt or overdrafting your account.
When you can’t see the efforts of your labor for a whole two weeks (or longer), it’s hard to realize the impact of every financial decision you make. It’s kind of like when financial experts recommend making purchases with cash. You can’t spend what isn’t in your pocket, so whatever you leave at home stays there. If you only have access to one day’s worth of pay at a time, you probably won’t make big purchases that you can’t really afford.
On a similar note, having better access to money can prevent people from splurging on payday. If you’ve already taken out some of your money to pay your bills during the week, you’re not going to see a very big deposit on payday…and you might even end up saving more than usual!
Using Rain can force people to pay closer attention to their money and their spending habits and learn a lot about budgeting and saving along the way.
On-demand pay can’t prevent unplanned expenses like medical bills or emergency home repairs from creating a problem — but it can help decrease the amount of debt Americans need just to make it from week to week. With the Rain Instant Pay app, people won’t need to take out a payday loan with a high interest rate just to be able to buy their groceries. Instead, they can get paid for the hours that they’ve worked right when they need it.
Sometimes, a grocery trip or a bill payment can’t wait two weeks for payday. Paying a small fee to withdraw funds from Rain is much more financially healthy than letting a bill go to collections or paying 400% APR.
The ability to see the wages you’ve earned after a shift means less financial stress and higher productivity. Imagine how much more likely a person might be to sign up for extra shifts when they know that after working just a few hours longer, they can withdraw the funds they need to buy dinner for their family. In turn, they’d feel better about themselves, they’d be less worried about where their next meal is coming from or whether or not they can pay their bills at the end of the month, and they’d be happier people.
Employee financial wellness affects the employer as well. Employees who are stressed about money are more likely to be distracted at work and more likely to be unhappy with their current jobs. Plus, more than half of minimum wage workers reported needing to work multiple jobs to make ends meet. Working multiple jobs means they’re probably showing up to work tired and are probably less productive than they could be.
It may not be an employer problem to fix, but it definitely matters. Employers can help by simply signing up for free programs (like Rain) that can help their employees stay on their feet. In return, employers are likely to have happier, healthier, more productive employees.