Consumers are weighed down by financial anxiety: A PwC report found 63% of respondents said their financial stress has increased since the start of the pandemic. And those numbers could be escalating given current economic conditions, with a survey from the American Psychological Association (APA) revealing that the rise in prices of everyday items due to inflation was the top source of stress for 87% of respondents.
Because employee financial stress and productivity are correlated, financial wellness is an important topic for any company. Here are four ways to help your employees feel more financially confident.
1. Understand why financial literacy matters
April is National Financial Literacy Month, which is the perfect time to introduce financial wellness topics. Your team is likely to appreciate the insight: Only 23 states require students to take a course in personal finance to graduate, according to the Council for Economy Education (CEE), which means many employees lack insight into the basics.
In fact, low financial literacy is an issue across generations: Only 11% of Gen Z, 18% of Gen Y, 17% of Gen X and 20% of Baby Boomers correctly answered at least three-quarters of a series of financial literacy questions on the 2021 TIAA Institute-GFLEC Personal Finance Index. As one example of a potentially harmful misconception, a separate survey found 65% of people believe carrying a balance helps your credit score, including 79% of Gen Z and 73% of millennials, even though the opposite is true.
So although you otherwise might assume your employees are familiar with basic economic tenets, a refresh can go a long way in starting them on the right path to financial confidence.
2. Introduce them to broader financial planning concepts
Now that you know why it’s important, you might be wondering how to make it happen. That’s where you can turn to outside resources, like local professionals. A real estate agent can discuss saving for a down payment and assessing how much house they can comfortably afford, or financial services experts can lead talks on how and why to develop a budget, the importance of an emergency fund and how to handle credit responsibly.
Host a video session or brown bag lunch and encourage employees to come with questions. Often they are unaware of the impact of their financial choices and how small changes can make a big difference. You can also suggest apps and podcasts that can help them brush up on financial concepts and better manage their own cash flow, like Valley’s “My Money Manager” tool.
Wondering what to cover? The Financial Literacy and Education Commission shares five key components of financial literacy: earn, spend, save and invest, borrow and protect so tackling each of those areas can ensure a well-rounded approach.6
Once again, your team will thank you: According to MetLife’s 20th Annual U.S. Employee Benefit Trends Study 2022, employee interest in financial planning workshops and tools has increased by 27 percentage points over the past five years.
3. Explain your benefits programs thoroughly
With today’s quest to attract and retain talent, most companies have unveiled benefit programs that are more comprehensive than ever. Yet sometimes employees don’t know what’s available or how to access it.
To help them take advantage of all you offer, expand access to information and explanations on your programs and how they can help your employees’ finances. For example, walk them through your various health insurance plan options and explain the relationship between their deductibles and premiums to help them choose the plan that’s most appropriate for how their family consumes healthcare. If you offer disability and life insurance, explain how these policies can help protect their families.
Find multiple ways to distribute ongoing information to your team. Often benefits information is only included in onboarding requirements at the beginning of their employment when it can be easy to overlook with all the other information they are processing. Hold regular sessions where employees can ask questions; update your website with pertinent information; reference programs in internal communications; and provide frequent short reminders to keep financial-related benefits opportunities top of mind.
4. Encourage employees to save
It’s never too early to start saving, and also never too late. Invite your retirement account plan administrator to explain the importance of saving regularly and how compounding interest can help fortify a nest egg as they save for retirement. Discuss the benefits of tax-advantaged accounts (which allow you to save money without paying tax on it) and share how a 401(k) match works if you offer one, underscoring that it’s essentially free money if the employee saves at least up to the match.
In addition to retirement savings, explain the benefits of using a savings account to create an emergency fund that’s accessible for shorter-term needs. Many businesses even allow employees to divert a percentage of their paycheck directly to savings to automate the process.
Finally, review your offerings to see if there are additional benefits you can offer. Many employers create a “menu” that allows employees to choose the ones that are most meaningful to their lifestyle, such as pet insurance or student loan assistance. One little-known perk for employers of this popular choice is a provision in the CARES Act that offers you tax incentives for providing your employees with student loan repayments – up to $5,250 per year in tax-free loan repayment contributions. Initially intended to sunset in 2020, the incentives have been extended at least through 2025.8
Instilling financial confidence
While money conversations used to be taboo, today businesses are realizing that considering their employees’ financial wellness is part of engaging with the team holistically. When employees are stressed about money, their work – not to mention their health – can suffer. Offering resources and assistance to improve financial literacy will pay dividends individually and collectively. Looking for more background? Valley offers a variety of resources and information you can access and share with your team today.