If you're having trouble making a mortgage payment, worried about mounting medical bills or struggling with credit card debt, can you concentrate at work? Probably not as much as you should. Financial stress is a growing problem for employees -- and by extension, potentially an even bigger problem for employers. From employee assistance counselors to AARP surveys to academic researchers, more and more reports are citing financial stress as a serious obstacle to productivity. Which is why employers of all sizes -- from large corporations to small businesses -- should be interested in some of the attitudes and ideas regarding financial education in the workplace expressed in the recent Young Adults & Money survey
According to the survey, there's a sizable gap between the financial education and guidance that young employees want and what's actually offered by their employers. For instance, 50 percent of respondents want more retirement plan guidance, while only 30 percent of their employers offer it. Thirty percent want debt management education, but only 8 percent of their employers offer it. It's interesting to me that budgeting, investing, purchasing a home and saving for a child's education are also on the list. You might be asking if it's the responsibility of employers to provide this type of education. I'd say it's more of a mutually beneficial opportunity.
Financial Fitness Makes Good Business Sense.
From a business perspective, whether employers are trying to recruit new workers, retain valued employees or promote company loyalty, offering expanded financial education makes sense. To me, it not only demonstrates the company's commitment, it can boost morale and help employees avoid the financial potholes that cause personal anxiety and negatively impact performance.
For many young adults, entering the workforce is the first chance to apply the financial lessons they've learned -- and to realize what they don't know. It may be the first time they've had to manage a paycheck and support themselves. Employers who offer financial education are in a unique position to help these young people succeed personally and professionally.
Practical Steps Employers Can Take.
From an employer's perspective, money can be an obstacle in providing this type of education. But I believe, with a bit of creative thinking, even smaller businesses can encourage good financial health. Here are some ideas:
-- Start with a 401(k) or other employer-sponsored retirement plan. A company that's in a position to offer a 401(k) is also in a position to encourage participation. One way is to make enrollment automatic with a default contribution percentage, say 5 percent. The employee can, of course, opt out or change the percentage, but the door will have been opened to begin saving for retirement. Another idea is to set up an automatic jump in the contribution rate whenever an employee gets a raise. Offering a company match is also an inducement to participate. A smaller match up to a higher savings ceiling (for instance, 5 percent of the first $2,000 saved vs. 10 percent of $1,000) may encourage even more savings.
Guidance on making investment choices is another important part of any employer-sponsored retirement plan. Nearly one in four survey respondents expressed concern about making investment choices. If a 401(k) plan provider offers investing help, make sure employees are aware of it and can easily take advantage of it. Offering advice on investing within a 401(k) can be a first step in broader investing education.
-- Partner with third party professionals. Professionals in the community -- bankers, lawyers, mortgage brokers, stock brokers -- are often very willing to offer workshops and seminars. Whether it's a formal series of speakers or casual brown-bag lunchtime gatherings, providing access to these professionals can raise employees' awareness of financial options and help them make informed decisions. (Of course, any potential conflicts of interest must be disclosed and explained.)
-- Create a workplace culture that supports financial fitness. This starts with a commitment at the top to encourage managers to learn about financial fitness and reward them for taking action. It can be as simple as making financial concerns a part of employee/manager discussions or as formal as incorporating financial education programs into specific departmental initiatives.
While many employers offer some type of retirement planning advice, to me the need for financial education -- and the opportunity -- extends far beyond this. Today, as financial stresses mount, there's no doubt that both employees and employers are suffering the consequences. The worries that employees have aren't just about what to do in the future, they're about how to pay the bills today. And it's affecting performance. A recent study suggests that up to 80 percent of financially stressed workers spend time during the day dealing with personal problems.
The forward-thinking employer who turns some of that downtime into time devoted to promoting financial fitness will help boost productivity. Employers who actively offer financial fitness programs can play a significant role in helping young people -- and all employees -- make sound financial decisions that will help them throughout their lives. To me, that's not only good for society -- it's good for business.