Money’s Too Tight to Mention

Employees – Americans in general – are struggling with money. Too much debt, too little savings. Employers are seeing signs of these personal money problems bleed into the workplace in wage garnishments, loans against the retirement plan, bankruptcies, low participation and contribution rates in retirement plans.

And now headlines like “Financial Education Goes Mainstream” and “Money Worries Hinder Job Performance” – combined with various expert opinions on the subject – are pushing companies to provide comprehensive financial education. This leaves many HR Executives with questions:

Q1. Why is this our responsibility? What’s in it for my company?
These are common questions among companies who do not currently provide employee financial education. It may or may not be your responsibility, depending on ERISA and SOX interpretations and the structure of your retirement benefit. But it is in your best interest, because providing financial education to employees will bring as much benefit to your company as it brings to your employees’ lives. Not providing financial education can potentially cause much harm to your company, and can cost you in many ways.

Q2. How can providing financial education to employees about personal money matters translate into good things for my company?
Your company can reap value in many ways. A company can save money beyond the cost of the educational programs: dollars that flow through to the company’s bottom line.

A few of the most often recognized areas include, but are not limited to:

• Increased productivity
• Reduced health care costs
• Reduced turnover
• Reduced absenteeism and presenteeism
• Increased benefit utilization and appreciation
• Improved employee retirement readiness
• Savings in HR administrative time (esp. payroll)

We created an ROI analysis to help companies evaluate a few of the many areas in their business. An ROI analysis can help a company determine if the investment in financial education will bring value (taking only quantitative factors into consideration). Even when odds are stacked against possible areas of savings, it indicates that a company can more than pay for its financial education campaign with the savings.

Q3. Assuming a company is committed to providing comprehensive financial education to employees, what should they look for in choosing a provider?
First consider your goals and options. Take note that your retirement plan provider – often the first place companies turn – may not be the most appropriate provider for a comprehensive financial education offering. Review the content and nature of the programs to be offered to ensure they will meet the diverse needs of your workforce, the instructors’ qualifications to provide education, and the frequency and timing of the programs.

For online tools, the biggest mistake we see is providers offering “online tools” but little instruction. Many online tools leave room for misinterpretation and misuse. Online tools can be terrific; but just like the live workshops, they need to follow adult learning principles, require interaction, and offer a logical navigation through the steps in an order that will help the user learn and form a personal action plan.

Q4. What outcomes can be expected?
Regardless of your employee demographics, you should see improvements in some or all of the areas discussed, and likely more.

Additionally, the improvements should more than pay for your financial education program. One of our long-term clients crunched numbers in only one small area of visible, trackable improvement. It offered a flex spending account that was only being used by seven percent of the employee population. After a few years of consistent education, the rate had increased to 37 percent. Assuming a contribution amount of $2000 per participant and the FICA tax savings of 7.65 percent, this company’s savings from the additional participants was more than enough to pay for its ongoing, annual financial education program. All other areas of improvement were savings to the bottom line!

Companies who do financial education “right” will see many positives - represented on the bottom-line AND in the happy and engaged employee population.

The EDSA Group, Inc. is a national leader in workplace financial education. The EDSA Group offers live workshops, one-on-one educational meetings, and an online financial education program, Goodmoneyhabits.com, to empower individuals to make informed decisions about finances. For more see http://www.theedsagroup.com/

Susan Windham – The EDSA Group
Susan Windham is CEO of The EDSA Group, a national leader in workplace financial education. The EDSA Group offers live workshops, one-on-one educational meetings, and an online financial education program, Goodmoneyhabits.com, for employers who want to help employees make informed decisions about their personal finances. Windham may be reached at (001) 800 942 2777.