Five Ways to Effectively Promote Employee Financial Wellness

Research from Northwestern Mutual’s Planning & Progress Study revealed that a solid third of all American adults have less than $5,000 put aside for their golden years. One of the biggest contributing factors to this low retirement savings rate is the lack of financial knowledge and general practice of saving, budgeting and investing. According to the American Psychological Association, money is reported to be a top source of significant stress among Americans. When people struggle to save for short-term emergencies, they’re unlikely to prioritize saving for retirement—which, for many, is an amorphous concept that may be decades away. Without education on how to avoid debt, select investments, or prioritize saving for retirement, employees may feel ill-suited to make their own investment decisions, even when it comes to taking advantage of the employer match. As a result, employers who promote employee financial wellness on a holistic basis are far more likely to see increased participation in workplace benefit programs.

Benefits of Financial Education

The benefits of financial education extend far beyond an increase in benefit plan participation. Financial wellness programs help employees learn to manage their money and their stress. Having financially-secure employees can minimize job turnover (since employees in financial distress may be more likely to job-hop), reduce absenteeism, and boost workplace morale. By giving your employees the tools and resources they need to get their finances in order and improve their savings rates, you’ll wind up with a happier and more productive crew.

Helpful Financial Wellness Topics

The focus of your employee financial wellness curriculum will depend on the age, occupation, and general financial literacy of your workforce. Plan sponsors who know their employee demographics well are best-suited to select the topics and resources that should be offered.

However, there are some broad topics that tend to be most helpful to the largest number of employees. These include:

Budgeting for Success

Budgeting can be an important component of fiscal responsibility in all stages of life, but far too many people underestimate how much they spend in certain categories. With easy access to credit, going over budget by just a few hundred dollars each month can quickly (and quietly) land a household into debt.

By offering tools to help plan participants track their income and outflow, set budget categories, and monitor their progress, you’ll encourage smart spending and financial confidence.

Avoiding Common Money Mistakes

For many, one’s primary financial education comes from parents, and sometimes their peers. This means that some of the most common money mistakes may be inadvertently passed on without much introspection. For example, many believe that you have to have some consumer debt in order to have a high credit score. Others may purposely over-withhold their income taxes to get a larger refund while simultaneously carrying high-interest credit card balances.

A comprehensive financial literacy program will identify these money mistakes (which many may not even realize they’re making) and provide tips on how to avoid or correct them.

Balancing Debt Repayment with Retirement Savings

One of the biggest dilemmas workers can face involves what may seem like a binary choice—use extra income to pay down past debt or save for the future? Many are reluctant to put off savings indefinitely, especially if they’re likely to be dealing with debt for years or even decades to come.

On the other hand, allowing high-interest debt to accrue while excess funds sit in a low-interest savings account may not be the best idea. Employees can benefit from a broad overview of factors to consider (and calculations to perform) when making this highly individual decision.

Reviewing Basic Investment Concepts

Once budgeting has been tackled, employees may be eager to self-direct their increased retirement contributions. Learning some basic investment concepts can provide them with a great framework for investment decisions (as well as giving them a glimpse into decisions they may want to delegate to an investment expert).

Breaking Down Popular Investment Misconceptions

Many investors take rules of thumb to heart and may adhere to them even when these rules run counter to their own best interests. Breaking down these rules of thumb and explaining when (and to whom) they apply, as well as revisiting popular or widely-held misconceptions about the investment process, can keep employees from acting against their own best interests.

Start Financial Wellness Education

If you’re interested in developing a comprehensive financial wellness program for your employees but aren’t quite sure where to start, PlanPILOT can help. We deliver retirement plan advisory services to 403(b), 457, and 401(k) plan sponsors and can work with you to build a program that’s customized for your plan and plan participants’ needs.

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