Feel their (financial) pain first, then employees can focus on retirement planning
After providing budget resources, employers can help employees shift from a paycheck-to-paycheck approach to a more thoughtful and proactive style – pay off debt, create an emergency fund and tackle retirement planning.
The definition of employee wellness has changed. To attract and retain the best talent, employers must ensure that their people feel valued and purposeful. What was once primarily focused on physical health has evolved into a more holistic approach, caring for the whole person, including their emotional, mental, spiritual, and economic wellness.
If mentioning financial health seems out of place, it should not be when considering employees’ well-being.
According to a study done by PwC, 57% of respondents reported finances as the top cause of stress. In addition, the BrightPlan 2022 Wellness Barometer Survey indicated that financial stress results in employees losing an average of 11 hours per week in productivity, costing employers more than $4 billion.
Does this mean the answer is just higher compensation? Not quite.
Most Americans have not received any formal education related to financial literacy while in school or from their parents. Even today, only 19 states require high school students to complete at least one semester of personal finance before graduating, according to Next Gen Personal Finance. As a result, employees are not confident in managing their day-to-day finances, let alone planning for their future and retirement. Organizations that provide financial wellness programs deliver benefits employees want and need.
Step one: Taking stock
As a baseline, it’s important to understand that most people struggle with finances because they do not adequately plan. Looking back over the last three years, what employee might have anticipated the global pandemic, the constant threat of recession, and the highest inflation rate in 40 years? Employees are stressed and look to their employers for support and guidance. Integrating financial education and support is a great way for employers to demonstrate their care and investment in employees’ future.
Very few people maintain a budget, which is the key to planning, monitoring, and adjusting expenses.
One of the benefits of the evolution of financial technology is the broad array of resources available. There are numerous free apps available, such as Mint and the EveryDollar Budget app (ramseysolutions.com), free Microsoft Excel templates and a plethora of web-based solutions. Employers should consider assisting their employees with this task by compiling a list of these resources and encouraging them to utilize them. Another consideration would be to offer small rewards to employees taking the first steps. This could be small-amount gift cards or bonus points in their total rewards program for employees creating their first budget.
Often employees are intimidated about where to begin, and unfortunately, many people are ashamed of their financial situation. As an employer, you can increase employees’ knowledge to impact their current and future financial situation.
Step two: Thinking beyond payday
After providing budget resources, employers can work with partners to deliver programs that help employees shift from a paycheck-to-paycheck approach to a more thoughtful and proactive style. This can include a plan to pay off debt, creating an emergency fund, short-term savings goals, and long-range retirement planning.
Whether your retirement program administrator, financial and tax advisors, or even banking or insurance providers, these organizations often have existing programs that can be helpful to your employees and offered to you at no cost. Don’t be afraid to ask your partners to engage and provide their guidance and advice, as you may already be paying for this type of support.
For example, you can invite your retirement plan record keeper to come into your office (or host virtually) to routinely offer fundamental investment education and assist employees with establishing their retirement saving goals and monitoring their progress. Offering this on an ongoing basis is essential because it looks different based on each employee’s stage of life. For a 21-year-old, it’s about trying to make them understand the importance of starting early. For a 61-year-old, it’s about preparing them for retirement by helping them transition from accumulating savings to converting that to retirement income.
Step three: Engaging the team
Specialists advise that you should divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings. We are seeing employers connecting with community banks or credit unions to bring in resources to help employees learn about establishing an emergency savings account. This education starts with the ‘why’ it’s important and then tactically walks employees through how to automatically save money every single paycheck. Employees tend to automatically deposit their paycheck into their day-to-day checking account but may not understand they can also set aside a certain dollar amount to automatically go into their emergency savings.
Related: Beyond the 401(k) training: Empowering employees with financial literacy
You can also engage your CFO and Finance Team as they are well positioned to understand who your employees are and where they are on their journey, allowing for a more customized approach.
We have seen the positive impact that this approach can bring to organizations. When your CFO stands in front of employees and tactically shows them how to establish and monitor a personal budget and then demonstrates the importance of savings and how it is exponential growth, it shows sincere caring for your employee’s welfare.
It is critical for employers to ensure that benefits and compensation programs are strong to attract and retain talent. By designing offerings that acknowledge the whole person and address employees’ top stressors, wellness offerings serve all parties best and drive results that can make your company’s Total Rewards program the total package.