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The Benefits of Providing a Financial Education for Employees

The Benefits of Providing a Financial Education for Employees

By: Dona DeZube 

Financial education can be a significant benefit for employees. But did you know it also benefits employers? 

Employees who are better at managing their finances are less likely to end up with financial woes. That may also mean fewer requests for salary advances or hardship withdrawals from company 401(k)s.

Financial stress can impact your workforce in negative ways by reducing worker productivity and increasing absenteeism. In fact, financial angst is more common than you might realize. More than half (52 percent) of respondents from PricewaterhouseCoopers’ 2016 Employee Financial Wellness Survey said they’re stressed about their overall finances; 28 percent said their financial problems were a distraction at work. 

Financial education for employees can be a budget friendly investment with easy setup and lasting value. 

Large Company Benefits
Many large companies recognize the benefits of offering workers some financial education. 

Communications conglomerate Cox Enterprises provides employees with free access to one-on-one phone consultations with money coaches. These conversations cover topics such as debt counseling, retirement planning, budgeting and student loans, says Senior Manager of Public Relations Elizabeth Olmstead. A “Know Your Numbers” initiative provides a personal retirement readiness statement to eligible Cox employees to help them stay on track with saving for a comfortable retirement. 

These programs have had positive results and led to higher employee participation rates in retirement savings plans. “Management cares about these programs and helps drive them as educational tools for employees to understand and utilize their benefits,” says Olmstead.

Organize Initiatives Economically
The good news is that offering financial education and advice needn’t cost a lot of money or take a lot of time. Even informal sessions can have profound influences. 

Nest DC, a boutique property management company in Washington, D.C., schedules a brown bag lunch-and-learn about personal finances for employees. The sessions had a huge turnout and ran three times as long as expected. The meeting showed the company how eager employees were to learn about finances, says Managing Director Veronica Vivas.

Nest DC ended up buying access to an online finance program, then offered employees a chance to win a $1,000 drawing in exchange for watching the program’s videos and completing short quizzes. “It was low cost -- $10 per person per month, including the budgeting tool,” Vivas said. 

The focus on finances led more people to sign up for the company’s SIMPLE IRA (Savings Incentive Match Plan for Employees Individual Retirement Account.) Financial education also helped boost employee morale and cross-team relationships. A group of employees were inspired to save money by cooking lunch together in the company kitchen -- instead of going out to lunch.

Tap Service Providers
Companies that supply benefits to your organization can be a resource for financial education. MassMutual, for example, conducts free, on-site financial workshops called PlanSmart for its clients’ employees.

“The great thing about our program is it’s a turnkey solution employers can plug into,” says Allison Mislow, regional PlanSmart director for Barnum Financial Group, Shelton, Connecticut. While the four week, face-to-face program is typically offered only to employers with 500 or more employees, Barnum makes an exception for firms with higher on-site headcounts, such as law or engineering firms.

Each week the presenter talks about a financial topic and gives employees homework that applies the lessons to their own financial lives. At the end of the four weeks, employees have a greater understanding of where they stand with investments and how well they’re saving for retirement. 

The program incites employees to take action, too, with 58% of participants increasing their contribution to 401(k) within three months.

Your benefits provider may offer similar programs. Outsourced HR management firm strategic  HR inc., Cincinnati, recently asked its retirement plan administrator to send someone in to speak to the company’s 15 employees about retirement benefits and general finances. “It was a huge hit and demonstrated a need for further training,” says President Robin Throckmorton. 

Explore Smaller Options
Small organizations can usually find a local Certified Financial Planner® willing to provide financial education, says Aaron Kahn, an independent, fee-only CFP® with Wealth Management Strategies, Inc., Pittsburgh. 

While he does charge a fee to do roundtable discussions with employees, Kahn says the fee provides unbiased advice from someone who’s more of a sounding board than a sales person.

“I was doing a round table a few weeks ago with a group of mostly Millennials. They were well paid but had student loans and they couldn’t decide whether it was worth sticking with their current loan balance, consolidating their loans or dumping all their [extra] income into their loans,” says Kahn. "Someone from an investment firm might tell the employees to put extra income into investments, while a life insurance company adviser would likely suggest buying a life policy he says. A neutral adviser will discuss pros and cons of each option and how to calculate the best return."

Whether you choose to use a financial adviser or a reputable program, implementing financial education for employees has clear benefits for both organizations and workers alike.