One of the main reasons for a lack of adequate retirement preparedness is that employees are drowning in debt. They simply don’t feel they have the resources needed to fulfill their current financial obligations, while also saving for their futures.
This is where employers can be a big help.
Growing Debt
According to the Federal Reserve’s Survey of Consumer Finances, people between the ages of 45 and 54 reported the highest levels of debt overall, topping out at $134,600.
The 35 to 44 age group wasn’t far behind with an overall debt amount of $133,100.
Student Loans
The younger generations do not get away unscathed either. Apart from mortgage debt, student loan debt is the second highest consumer debt.
According to Make Lemonade, there are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. The average student in the Class of 2016 has $37,172 in student loan debt.
Saving for Retirement
All of this debt is keeping people from thinking about their future while they are putting out the fires of debt payments. One-third of Americans say that their debt is keeping them from reaching their financial goals – one of those primary goals is saving for retirement.
Here are staggering numbers to consider:
- 14 percent of Americans have nothing saved for the future
- 42 percent of Americans have less than $10,000 saved for retirement
- Only 16 percent of working adults have $300,000 in retirement savings
- 33 percent of baby boomers have less than $10,000 in a retirement plan
Saving Early
In my three decades of working in the financial industry, I have heard too many times how an individual has looked back on their life and said, “I wish I had started saving earlier.”
Saving money is an extremely important part of the fabric of life, and it is not being taught in schools or even by parents at home.
Employers have a unique opportunity to fill that void by providing financial literacy programs that can benefit all levels of employees by addressing both their immediate and long-term financial issues.
It Affects the Workplace
The financial burden of college loans, in addition to the financial responsibilities of rent or mortgage payments, utilities, car loans, and purchasing clothing, food, and other necessities, can carry on for years. Jobs that don’t pay enough, combined with a lack of financial literacy to fully address financial challenges, cause debts to pile up, slowly adding to the pressures that affect workers well into their thirties and beyond.
As pressures mount, employees’ focus turns toward their personal financial issues and away from job performance, negatively affecting productivity, profitability, and the company’s overall bottom line.
Employer’s Role in Employees’ Finances
Employers need to accept the fact that the poor financial literacy of their employees affects productivity. It has been shown that problems with personal finances cause stress, which in turn produces poor job focus, decision-making, and performance.
Not only do employers need to acknowledge the stress problem, but they need to realize that financial stress impacts the overall health of their employees. Both physical and mental problems can occur due to prolonged periods of worry over personal financial matters.
These health issues can lead to poor productivity, lost work time, and accidents caused by distractions. Poor employee health stemming from worry over financial matters can produce higher healthcare costs for the company.
Employees that need doctor visits, psychological counseling, medications, and various treatments can increase company costs, which erode their bottom lines.
It is more cost-effective for a company to offer financial education programs and educate their employees than it is for them to continue to pay the cost of stressed out and unhealthy employees.
If you are an employer looking for a tool to educate your employees and get them on the right track to better financial wellness, contact Mark Singer at info@financialliteracytoolbox.com to find out about The Financial Literacy Toolbox.
Mark Singer, CFP®, AIF® is the President and Co-Founder of Financial Literacy Toolbox. Mark 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, and institutional retirement services firms change the conversation about financial wellness.
