The financial and economic effect of the pandemic and government-ordered shutdowns has hit career military families, no less than anyone else. A big reason is job losses among military spouses. This is according to a survey by the financial services firm First Command. Here with details of the survey, First Command CEO Mark Steffe.
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Tom Temin: Mr. Steffe, good to have you on.
Mark Steffe: Thanks, Tom. It’s good to be here.
Tom Temin: Now the company First Command has developed kind of a financial health index for military families. Tell us a little bit about the index before we get into the survey.
Mark Steffe: Thanks, Tom. It’s called the Financial Behaviors Index. We’ve been doing a survey monthly since 2008. We survey about 530 US consumers every month, about 200 of them are military members or military spouses. And we’re really serving the top half of the military – E5s and up, so commissioned officers and NCOs.
Tom Temin: So this might be characterized as the military middle class?
Mark Steffe: Yeah, I think that’s I think that’s a fair way to say it. We’re looking at incomes of $50,000 and up so I think you nailed it.
Tom Temin: All right. And you survey these people recently on the effects of the pandemic. What were some of the findings?
Mark Steffe: The biggest findings from this survey are that military families are far more concerned about the impact of the pandemic, and its impact on their finances than members of the general population. Six out of 10 military families expect to be extremely or very financially affected by COVID-19, and that’s just versus 34% of the general population. I think one of the biggest drivers of that is the the fact that about 34% of military spouses have lost work or income due to COVID-19. And so military families are really seeing the pressure, the delayed PCS moves that we’ve seen have military families spread really thin, and about 57% of military families expect to have to tap into their savings in the year ahead. You know, I think the good news is that despite all that they seem to be better prepared. Military families seem to be better prepared than the overall general populace. Sixty percent of military families have three or more months of savings accumulated, and that’s versus just 46% of the general population. And we find within that, that military families that use a financial advisor actually do better than military families without one as well.
Tom Temin: And let’s get back to that $50,000 figure you mentioned in the beginning of the average salary for the military member. If that person has a spouse or significant other who is working and contributes to the household income, it sounds like that other person, the spouse would be contributing a fairly good portion of the total family income because at $50,000 it’s not like someone earns $250,000 and the spouse earns $30-$40-$50,000. It could be almost half the income that’s lost when the spouse loses.
Mark Steffe: It certainly could be up to half. And I want to be clear, we’re looking at the minimum annual household, the minimum annual household is $50,000. So it’s $50,000 and up but you’re right – I mean, the military spouses contribute a significant amount to the family’s total income. And so if 34% of them are unemployed, that is going to put a big hit on a military family’s total household income.
Tom Temin: And let’s talk about the delayed effort in the permanent change of station. I mean, that’s been something the whole military brass is trying to grapple with. And I think there’s a little bit of melting now of that freeze on movement. But what are the specific effects of the delays on families? What have you heard with respect to how it hits them financially?
Mark Steffe: With the military families I’ve spoken to, it’s almost two opposite ends of the spectrum. You get the delayed PCS and so they still have a home or an apartment in one location, and they’ve purchased a home or signed a lease in a second location. And now they’re carrying two leases or two mortgages, which really, as you can imagine, puts a huge strain on their finances. The opposite end of the spectrum I’ve heard is not so much a financial but more of a family issue is they may have given up their apartment or sold their home and not yet had an opportunity to get an apartment or purchase a new home in the new location. And they’re actually homeless trying to find a place to live. And a lot of times you see the military member separated from the rest of the family as they try to find a place to live in a way to take care of the family. So we’ve seen two dramatically different impacts on military families when it comes to these delayed PCSs.
Tom Temin: We’re speaking with First Command CEO Mark, Steffe. And I guess there’s another compound issue that happens here because for many years, one of the issues for military spouses that might have licensed types of occupations that they do, it could be real estate licensing to hair salon occupations – often the licenses are state-based, and therefore don’t carry over to the new location. But then you have compounded on this, the fact that even if they could carry the license over to a new location, that location and the businesses in it might not be open.
Mark Steffe: Exactly. And that’s part of the trouble we’ve seen as you’re as you’re saying, You’re trying to get established in the new location, are businesses open? If they are open, are they hiring? If you’re a hairdresser, for instance, or maybe you’re selling real estate, how do you now go out and build that business back up in the new location because clearly the clients aren’t going to transfer with you. So this pandemic is clearly put a huge strain on everybody, but in particular, the military families.
Tom Temin: And if you have, say, a client, a customer of First Command, and they are in one of those situations, say they are having two leases in two locations or they’re homeless, and they need a loan just to stay somewhere in the meantime, are financial instruments, loans available, predicated on those circumstances, knowing that eventually it will resolve and one lease will go away, and the income will continue because they’re still employed by the military?
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Mark Steffe: Yeah, we at First Command have done a lot to try to help our existing clients get through these issues. We’ve offered the opportunity to skip payments on certain loans. We’ve offered reduced rates on our loans. We’re expediting requests to increase credit limits on on credit cards. We’ve got a history with our bank, First Command Bank, of really working closely with our military families in times like these through government shutdowns and other things we’ve unfortunately had to experience in the past, to do what we can to keep our military men and women secure and keep them on a path to financial security. The great news about our clients is so many of them have followed the coaching that we’ve provided and are still financially squared away, that while we are able to offer this assistance to our military families, many of them don’t have to tap into it because they follow these improved financial behaviors and they put money aside. And an interesting statistic coming out of all this other financial behaviors index is that despite the military’s higher concern for what COVID will do to their family finances, in April 27% of military families with an adviser increased their savings as a result of the pandemic and we saw just 12% of military families without an adviser do the same thing. So we’re seeing dramatic differences not only from the general population versus the military families, but within the military themselves. Those with an advisor versus those without an advisor.
Tom Temin: And just a final question, are there any geographical differentials in how this has impacted military families?
Mark Steffe: You know, we haven’t seen the geographical differences that really hasn’t come into play. I mean, I know that I think that the PCSs have been the biggest challenges, the shutdown to the businesses have been the biggest challenges. And although every geography is different in how severe the shutdowns have been, we’ve seen a pretty big impact across the country. We haven’t seen it narrowed down to just pockets, but it’s extremely widespread.
Tom Temin: Mark Steffe is president and CEO of First Command. Thanks so much for joining me.
Mark Steffe: Thank you, Tom.
Tom Temin: We’ll post this interview at FederalNewsNetwork.com/FederalDrive. Subscribe to the Federal Drive at Apple Podcasts or Podcastone.