Financial pressure is significantly impacting the lives of millions. In fact, the significant majority of Americans agree that finances are their number one cause of stress – more so than politics, work, and family. This takes a toll not only on employees, but also businesses: employers lose nearly one month of productive workdays each year due to financially stressed employees. Given that April is Financial Literacy Month, it’s an opportune time to focus on improving employee’s access to tools and information, thus setting them up for a more secure financial future. Get started with these five steps:
1. Offer a company-sponsored retirement plan. While retirement plans offer benefits to employers such as tax incentives and recruitment strategies, there are significant perks to employees as well. For employees, participation can reduce their current taxable income as well as improve their financial security in retirement. In fact, people with access to a plan are twice as likely to report planning for retirement than those who do not have access. To increase participation, you may also consider implementing specific plan features, including:
- Auto-enrollment: Setting up automatic enrollment has been proven to boost plan participation rates by as much as 221%. It could also have a positive impact on the amount employees save. Compared to employees in plans where enrollment is voluntary, saving rates are 56% higher for individuals in plans with auto enrollment.
- 401(k) match: For employees, this is essentially free money, encouraging them to save faster and more successfully for their future. For you, it means a bigger tax break.
2. Provide financial literacy training. Two-thirds of Americans fail a financial literacy test on topics such as interest rates, debt, and investing. While financial education programs are on the rise (they’re required in school curriculums in 37 states), we still have a long way to go. Employers have an opportunity to educate their employees in the office (or virtually). To help close the knowledge gap, consider inviting a local financial advisor to come speak with employees on a quarterly or bi-annual basis. Having a third party can help employees feel more comfortable seeking advice on a personal topic.
3. Show you’re investing in them. Whether you’re providing a 401(k) match, college loan reimbursements, HSA incentives, or financial literacy programs, literally “investing” in your employees shows your commitment to fostering financial wellness in the workplace. In turn, it can motivate employees to learn more about their personal finances and help them meet their financial goals.
4. Make it fun. Research confirms that fun experiences promote learning, memory retention, and willingness to try new things. The gamification of financial education in the workplace can help you create informative yet entertaining content for your team. Consider implementing money saving challenges to make saving for the future exciting and competitive. You can also gamify financial literacy education through the use of mobile apps.
5. Provide a financial toolkit. Create a financial literacy toolbox for employees, which can include resources and free tools like retirement planning and investing estimators, budgeting calculators, and credit score simulators. You may also want to incorporate instructions for how to create a budget as well as a glossary of financial terms.
As the lines between work and life continue to blur, the day-to-day stresses can impact their work more than ever. By providing ways to improve financial literacy, you can help reduce financial stress, improve employee well-being, and increase retention. Whether you choose to take up one – or all! – of the steps above, the investment in your employees’ financial wellness will leave a lasting impact for years to come.
President of Retirement Services