After receiving a financial education, moldmaking employees have greater confidence that they are making the right decisions resulting in improved work performance.
Personal finances play a significant role in the level of work-related stress people experience. Most of us are taught how to make money, but not how to effectively manage the income we earn. As a result, poor spending habits and high levels of debt can derail the financial goals of many employees who often lack the knowledge and confidence to evaluate their own needs. In addition, many employees are unprepared to manage the 401(k) investments that will have an effect on their long-term financial security.
In a recent survey conducted by the Employee Benefit Research Institute, only 23 percent of the one thousand employees surveyed said they received retirement investment advice through their place of employment. However, businesses are starting to recognize the importance of financial education, and are starting to make it available to employees. Like wellness programs and day care assistance, financial education can be an important tool to motivate employees toward higher productivity and foster loyalty, as well as assist them in their retirement savings needs.
Today's employees usually expect their benefits package to include a retirement plan—they have almost become a necessity for attracting and retaining quality employees. With the future of Social Security in question, people are worried about their financial security in retirement and need a simple tax-advantaged way to save.
However, just providing a retirement plan does not completely solve the problem. Unfortunately, some employees may be reluctant to participate in a retirement plan because they may not understand the benefits of participating in the available plan; others may procrastinate about saving for retirement. If they participate, many employees often underestimate the amount they should contribute and feel unsure about their investment decisions. While offering an employer-sponsored retirement plan is a valuable first step, your employees will probably need additional tools—and the financial education to use these tools—to meet their retirement goals.
At a minimum, you should help employees understand the features of your retirement plan, discuss general financial information and provide investment information. Also, asset allocation models and interactive investment materials may be helpful in their retirement plan education.
In addition, helping your employees get the most from your company's plan, may benefit your business. Education has proved to be an effective way to help improve employees' abilities to manage their finances. After receiving a financial education, many employees are able to make better financial decisions and, perhaps more importantly, have greater confidence that they are making the right decisions. If employees are less distracted by personal financial challenges, they'll be more focused on their job and more satisfied. These factors should result in improved work performance, which will benefit both you and your business.