According to a 2018 study by Northwestern Mutual, 21 percent of Americans have no retirement savings and an additional 10 percent have less than $5,000 in savings. A third of Baby Boomers currently at, or approaching, retirement age have between zero and $25,000 set aside. The Economic Policy Institute (EPI) paints an even bleaker picture, reporting that “nearly half of families have no retirement account savings at all.”
Most Americans are far from the levels necessary for a healthy retirement. This data makes a recent GOBankingRates savings survey response even more interesting: “The number one thing Americans are saving for is retirement.” Hard-working Americans want to save—it is our responsibility to put them in a position to do it
Employers are taking a more active role by implementing financial wellness programs to assist employees with their current financial challenges. The real value comes from creating behavioral change that will lead to long-term financial stability. Employees want to save. Employers want to help. Where is the disconnect?
Simple investment advice or siloed solutions may help in the near-term, but that alone will not solve the inherent problem. The adage is absolutely true: Give a person a fish and he’ll eat for a day. Teach him to fish and he will eat for a lifetime.
FinFit conducted a study over the past two years on 30,000 members participating in a financial wellness platform with the goal of creating behavioral change. The study grouped members into three categories:
Healthy: Individuals exhibit positive financial behaviors that will allow them to be resilient and on track for long-term financial success
Coping: Individuals exhibit some positive behaviors but also experience challenges that require significant behavioral change to reach long-term success
Vulnerable: Individuals exhibit poor financial behaviors, are struggling and require immediate assistance and behavioral change to adjust course for long-term success
Here are some findings that demonstrate the issue is largely behavioral, not solely a matter of resources:
- 31 percent of the vulnerable participants make over $50,000 per year
- 27 percent of the vulnerable participants are over the age of 45
- 88 percent of the vulnerable participants recognize they have too much debt
- 38 percent of the vulnerable participants believe their most important financial goal in the next 12 months is to take a vacation
With hundreds of different data points on each member, the data quickly demonstrates that unhealthy financial habits are not isolated within the low income, young, resource-deprived community. The key to long-term financial security is not to simply acquire more income/assets; the key is to change and improve upon the daily financial behaviors of these employees.
Finding the motivators of change
How do you create behavioral change to enable employees to save? To give them the ability to plan? They must have the opportunity to move past today’s financial challenges, relieve the stress and the worry so they can think about saving for the future.
This is where financial wellness programs are proving to exponentially increase the likelihood that employees can properly plan for retirement. What works? What’s the impact? How long does it take? What I can tell you is what I’ve learned from these 30,000 employees over the past two years. Nothing simply ‘works.’ If employees are not motivated to participate, then nothing will create the behavioral change no matter how great the tool/resource.
What our data has told us is that individuals are uniquely motivated; what drives one employee may not motivate their co-worker. One size DOES NOT fit all. The psychology of engagement is a story for a different day, but our experiences have led to four main silos of motivation:
Recognition. Programs, communications and messaging that recognize positive employee behaviors in front of their colleagues, family, community and organizational leadership can be impactful. Everyone feels good knowing they’re making progress, especially when it comes to money management and saving. A pat on the back for a job well done is often enough encouragement to keep it up.
Rewards. Monetary or not, being rewarded for accomplishing key goals and milestones along the path to financial stability is not only motivating for participating members to continue, it motivates new employees to join the crowd. Often the rewards are included in financial wellness programs and require nothing out-of-pocket for the employer. Word of mouth is huge—employees find out that their co-workers are not only able to contribute more to their retirement plan, but they’re getting perks while they do it? “Sign me up!”
Fun. Gamification, contests and other forms of interactive training to make learning/activities fun and engaging for both individual members and large groups across individual organizations has proven successful. A little friendly competition within the workplace – that is supported by the organization—can be hugely impactful for morale and participation. When the organization makes financial wellness a priority and supports employees’ participation, it creates a very positive and welcome cultural shift.
Results. When employees start to see the savings accumulate, the retirement accounts increase, the rainy-day fund grow – they want to do more. They’re encouraged to continue to pay their bills on time, stick to their budget and be smarter with their money. They see the results of their hard work. The effort is paying off. That is the behavioral change. And that is when it gets exciting, for both employers and employees.
Financial wellness programs are moving the needle. The behavioral change we’ve seen with financial wellness program participants is remarkable: