As economic stress increases for American workers and attitudes about dependency change, … [+]
A startling report from the Global Center for Financial Literacy Excellence found that U.S. adults scored just 48% on the 2024 TIAA Institute-GFLEC Personal Finance Index. Not only does this disturbing trend stifle personal growth, but employers are increasingly realizing that a lack of knowledge is hindering organizational productivity as employees struggle with financial stress.
Compounding this issue is the startling revelation that a 2022 survey by the National Endowment for Financial Education revealed that 35% of Americans confess to being plagued by the constant fear that their assets will be depleted and are simply “just making ends meet financially.” This constant financial anxiety is having a tangible impact, with 80% of employees reporting at least some level of financial stress between 2021 and 2022, and an astonishing 27% experiencing great or overwhelming stress, according to Financial Finesse.
Given the significant impact that financial stress has on both individual well-being and organizational productivity, it is imperative that employers rethink and redesign financial wellness programs that are more personalized, engaging, and effective. In doing so, they can foster more financially stable, more productive, and more loyal employees, ultimately increasing the success of their organizations overall.
The problem with traditional financial wellness programs
Although the importance of financial well-being in the workplace is widely recognized, significant disparities remain. Cerulli Associates recently found that 71% of 401(k) plan sponsors have adopted financial well-being programs. However, the report found that most financial well-being products and services have usage rates below 20% among targeted participants, highlighting a significant gap between adoption and actual use.
According to the Cerulli report, this low participation rate is the primary reason why many 401(k) plan sponsors decide not to offer financial wellness programs, as traditional programs often don’t incorporate the interactive, personalized, and accessible features that can truly meet participants’ needs and achieve the intended outcomes.
Misaligned priorities among employers exacerbate the issue: Callan’s report highlights that while participation rates are the most commonly used metric for measuring success among plan sponsors, participant education, communication and retirement preparation rank seventh and eighth among areas of focus, with plan governance and process taking the top spot.
This disconnect between stated goals and prioritized actions highlights the need for a fundamental shift in the way employers approach financial wellness initiatives.
Changes in Workplace Financial Wellness
74% of employees want personalized guidance to help them navigate financial decisions, crises, or life. … [+]
In the report, Cerulli analyst Elizabeth Chifer emphasized that “the most effective financial wellness programs should evolve to include guidance that offers users actionable, achievable steps to improve their financial lives.”
“Financial education alone develops financial literacy, but it’s only one component of financial wellness,” Chifer further points out. “Financial wellness programs must help people make positive financial decisions.”
Chifer’s views are in line with a PwC report, which found that 74% of employees want personalized guidance to deal with financial decisions, crises or life events. Employees crave advice that takes into account their unique financial situation and provides clear, actionable steps to improve their financial situation.
The benefits of a well-designed financial education program go far beyond employees’ personal well-being. Financial Literacy and Wellbeing Journal They found that such programs could restore at least one hour of productivity per week for each participating employee.
Justin Roberts, senior manager of financial benefits at Amazon, attests to the extraordinary value of the company’s comprehensive financial wellness program: “For every dollar we put into the program, employees get about $3 worth of value out of it,” he said. Personnel Officer.
In today’s competitive environment, rethinking workplace financial wellness is not just a nice-to-have option; it’s a strategic imperative that leads to a more engaged, productive, and financially stable workforce. By addressing the shortcomings of traditional programs and embracing innovative, employee-centric solutions, employers can make a lasting positive impact on the lives of their employees and the success of their organizations.
Implementing an Effective Financial Wellness Program
Employers have two main options for implementing an effective financial wellness program: build an in-house program or partner with an expert to create a customized program tailored to their employee demographics.
The key to a successful financial wellness program is finding the right partner. … [+]
By shifting this burden to a specialized employee benefits partner, employers can provide quality financial wellness support without straining their own resources. Recognizing the mutual benefit of a well-educated employee making sound financial decisions, some providers are including these services in their standard fees.
Financial wellness programs are a powerful way to attract top talent in a competitive labor market, so they should be a priority for employers, and employers are starting to wake up to the idea: A Bank of America survey found that 97% of employers feel responsible for their employees’ financial wellness, and 91% feel that providing resources to manage overall wellness increases employee satisfaction.
Additionally, these programs increase participation in 401(k) plans, improve non-discrimination test results, and ultimately lead to less worry about contributions in the plan, leading to higher employer satisfaction. Providing access to a content library is not enough: Employees need personalized, ongoing guidance to navigate the vast amount of financial information available through various channels, including search engines like Google, apps like TikTok, and AI-driven advisors.
Successful financial wellness programs provide employees with consistent, understandable, and relatable guidance to help them make small, impactful financial decisions. This practical support helps employees feel more confident and at ease in their financial journey, ultimately leading to positive long-term outcomes for both employee and employer.
In a time of widespread financial stress and ignorance, rethinking workplace financial wellness programs is no longer an option, it’s a necessity. Programs should offer a range of topics and resources, from basic budgeting and debt management for new hires to advanced investment strategies and retirement planning for experienced professionals. By adopting innovative, personalized and engaging approaches, employers can help employees achieve financial well-being and foster a more productive, engaged and loyal workforce.
After all, investing in the financial wellness of its employees is an investment in the long-term success of the organization itself. It’s time for employers to embrace this paradigm shift and unlock the transformative potential of a truly effective financial wellness program.
Brian Menichella: Beacon Financial ServicesA full-service financial advisory firm based in Wayne, Pennsylvania.
Securities and advisory services are offered through LPL Financial, a registered investment adviser. Member FINRA/SIPC.
This material has been prepared for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice.
