401(k) advisors can help provide companies with a number of services and suggestions for maximizing financial wellness results in their workforce. The following elements have been provided by both American and Canadian business owners who have administered successful financial education strategies, with the percentages gleaned from the International Foundation of Employee Benefit Plans (IFEBP).
1. FINANCIAL EDUCATION BUDGET
It should be evident that any plan for building a successful financial wellness program will need to be backed by a budget that’s specifically devoted to the task. Having the funds to launch and maintain a good financial education program effectively demonstrates to employees that you are serious about the endeavor, which boosts morale and encourages greater participation rates. Thirty-two percent of companies that have launched successful financial literacy programs have budgets devoted to this end.
2. ASSESSING NEEDS
The first step toward a successful financial education program is to determine which financial topics should be made a high priority to meet the pressing needs of the employees. Not everyone has the same financial problems, and certain educational needs can be more prominent in one company, city, state, or country than others. Therefore, an assessment should be made that identifies personal circumstances and future goals of employees so that behaviors can be adequately modified and new skills can be implemented.
This targeting of employee financial needs will help to maximize the time, cost effectiveness, and end results of implemented educational programs. Assessing the most important topics and issues of employees is part of the successful financial education strategy used by 35 percent of companies.
3. EDUCATIONAL OPPORTUNITIES DURING WORK HOURS
Offering financial education programs at the workplace during normal working hours is a vital element for achieving successful results. Its importance is reflected in the fact that 84 percent of businesses with successful programs provide such financial education opportunities in the workplace and during hours which accommodate their employees.
It has also been found that one-on-one financial counseling sessions provided during working hours are even more effective than group sessions. Eighty percent of employees who are provided one-on-one financial counseling end up taking positive steps, which include making immediate savings increases through payroll deferral (9 percent higher), and agreeing to future automatic savings increases (19 percent increase).(2)
4. INCLUDE SPOUSES
Another fundamental aspect of financial education included in 50 percent of companies with successful financial wellness programs is the inclusion of employee spouses. Money problems are a leading cause of arguments between married couples and possibly even divorce.(3) Financial issues that begin in the home not only affect the home environment, but the work environment as well, since most people bring their hurts, anger, worries, and other adverse emotions and thoughts to the job, which can have a deep impact on the company’s bottom line.
Including spouses in a financial literacy program helps solve financial problems where they start — in the home. As spending, borrowing, and saving behaviors of couples are changed for the better, the home environment becomes healthier, which in turn produces happier employees and a more positive and productive workplaces.
5. RETIREMENT SERVICES
One of the main focuses of providing financial education to employees is to increase their retirement savings. Therefore, good retirement plans and services should be in place to meet this need. As employees become more financially literate and learn to change their financial behaviors toward more productive means, they will have extra income to dedicate to 401(k)s, IRAs, and other employer-offered retirement savings vehicles.
An additional benefit of retirement plans for the companies that offer them is that workers tend to stay longer, especially employees that are 40 years of age and younger. Sixty-three percent of employees in that age range reported in a 2011 survey that retirement plans were a top factor in their accepting job positions in the first place, which more than doubled the 2009 figure of 28 percent.(4)
6. MINIMIZE SAVINGS LEAKAGE
Besides low retirement plan participation rates, plan fund losses are another major problem when it comes to long-term retirement savings. These losses, also commonly called “leakages,” consist of fees and penalties associated with loans taken out against 401(k) and IRA balances, or cashing out these plans entirely. As much as 1.5 percent can be lost on assets held in retirement accounts through such leakages.(5) That is $1,500 lost on a $100,000 plan, which is a significant amount in terms of retirement funds.
Employers should strive to create rollover processes that are more employee-friendly. This helps discourage cash-outs that are commonly conducted when employment is terminated. More people would roll their plans over from one employer to another if that option was both available and fairly easy to accomplish. Also, correcting poor financial habits through educational opportunities and provided resources will lessen the need for employees to take out loans against their savings plans.
7. EDUCATIONAL METHOD VARIETY
Utilizing a variety of methods in financial education programs is yet another important factor in the success formula, according to the IFEBP data, which show that companies that operated more successful programs offered seven educational methods on average, compared to only five methods used by employers with less desirable results. Services commonly provided by financial planners offering educational programs include those stemming from classes, workbooks, newsletters, personal consultations, email contacts, calculators for retirement income plans, and online sources for information and educational courses.
ACHIEVING RESULTS
When financial wellness programs are effectively planned for and implemented, they usually offer participating companies a high rate of success at solving employee personal financial issues and creating a more productive and profitable business atmosphere. It is important to create a financial education budget and work with financial planners to identify and prioritize employee needs, provide learning and counseling opportunities during normal working hours, and include spouses in the process.
Companies should also offer retirement plans and services, help employees minimize retirement fund leakage, and ensure that a variety of educational methods are used and made available to employees. The financial health of your employees, as well as the productive health of your company, can be significantly improved simply by changing the financial conversation and utilizing proven financial educational methods.
Mark Singer, CFP®, AIF® is a leader in the world of financial education. Mark is the author of three books, a frequent speaker at events, and is the creator of The Financial Literacy Toolbox, a virtual resource center to help financial advisors, wellness providers, or institutional retirement services firms change the conversation about financial wellness. Please complete this one minute survey, to receive a free copy of Mark’s newest book “The New Financial Wellness: Changing the Conversation.”
© Mark Singer, CFP®, AIF®
1 Benefits Canada (2014). Financial Literacy Programs Help Employees’ Well-Being. Available from www.benefitscanada.com/news/financial-literacy-programs-help-employees-well-being-59012
2 Kadlec, Dan (July 19, 2012). Time Incorporated. Proof That Workplace Financial Education Works.Available from business.time.com/2012/07/19/ new-evidence-says-workplace-financial-education-effective/
3 Dew, Jeffrey; Britt, Sonya; Huston, Sandra (Sept 4, 2012). Examining the Relation Between Financial Issues and Divorce. Available from onlinelibrary.wiley.com/doi/10.1111/ j.1741-3729.2012.00715.x/abstract
4 Nyce, Steve (March 2012). Attraction and Retention: What Employees Value Most. Available from: www.towerswatson.com/en/Insights/Newsletters/Americas/Insider/2012/Attraction-and-Retention-What-Employees-Value-Most-March-2012
5 Federal Reserve (2013). Survey of Consumer Finances.