financial literacy Archives

Retirement Concerns: Is Financial Literacy the Solution?

by LizStevens | Apr 17, 2019 | Blog

Retirement concerns: is financial literacy the solution? Those workers that do have a 401k aren’t saving enough to cover expenses in retirement, even when employers match contributions.

Retirement is a far-off goal most Americans don’t even think about while they’re paying down debts, struggling to pay for childcare and taking care of aging parents. It’s become so disconnected from reality that 20 percent of Americans are actually basing their retirement plans on winning the lottery, according to research by Stash.

Americans Are Not Saving Enough for Retirement

Not saving enough for retirement is the number one fear among middle-income earners, and with good reason. Four researchers at Kellogg School of Management at Northwestern University recently found three-fourths of American workers with defined contribution plans like 401(k)s aren’t saving enough to maintain their standard of living later in life.

Can Financial Literacy Solve Retirement Concerns?

Nearly half of U.S. adults failed to correctly answer basic financial literacy questions in a recent annual assessment.

The P-Fin Index by the TIAA Institute asks 28 questions across eight functional areas of finance including: earning, consuming, saving, investing, borrowing/managing debt, insuring, comprehending risk and go-to information sources. American adults scored highest in the area of borrowing/managing debt and lowest in comprehending risk.

This year, the P-Fin Index included several new questions indicative of financial wellness. According to the report by TIAA Institute, “Greater financial literacy is positively associated with the capacity to handle a financial shock, saving for retirement on a regular basis, being unconstrained by debt and other indicators of financial well-being.”

Financial Wellness Programs and Financial Literacy

Financial literacy is indicative of financial wellness and high school curriculums across the country are adding personal finance courses as a requirement for high school graduation to start addressing the widespread lack of financial literacy.

What about the half of U.S. adults who couldn’t answer basic financial literacy questions? How can they learn the skills they need when they don’t know where to begin?

Financial wellness programs help workers improve financial literacy, pay down debt and save for retirement. They are a valuable employee benefit and with the right financial wellness program, like Best Money Moves, employees are given the tools and resources to help them attain financial literacy while they better their financial wellness.

More on Retirement:

How to Help Employees Save More for Retirement

Financial Support Limits Retirement Readiness for Parents

Revealing Research on Financial Stress and Productivity

What Does Financial Wellness Look Like for Women?

What Tops Financial Stress for Employees?

What Is Financial Literacy and Why Is It Important?

by LizStevens | Mar 25, 2019 | Blog

What is financial literacy and why is it important? It’s knowledge employees need to reduce financial stress and financial wellness programs can help them improve it.

Over 40 percent of employees are too worried about their financial situation today to think about the future, according to a survey by BlackRock.

Despite mounting financial stress, many prioritize convenience over savings. A third of employees would choose to take $1,000 now rather than wait a year for $3,000 and two-fifths of employees would quadruple their transportation costs to save 20 minutes, according to new research by PurePoint Financial.

“Our survey found that 1 in 3 people in the U.S. don’t feel in control of their finances and half are too embarrassed to talk about their savings with their friends,” said Pierre Habis, president of PurePoint Financial.

Habis continued, “We understand how important financial security is to all of us and that saving may seem daunting, but it just takes minor adjustments, such as creating financial goals, setting aside whatever you can manage from each paycheck or searching for better interest rates for your savings account.”

Habis makes it sound easy, but most Americans don’t know where to begin when it comes to improving their financial wellness. What he refers to as minor adjustments could feel like major fundamental changes to a family that lacks financial literacy.

What is Financial Literacy?

Financial literacy is an understanding of the skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources. It encompasses budgeting, saving, investing, and includes anything and everything that deals with money management.

Why is Financial Literacy Important?

Financial literacy is important because it can help people with high levels of debt correct course and better prepare themselves for retirement.

Three years after implementing a financial education mandate for high-schoolers in Georgia, Idaho, and Texas, all three states saw increased credit scores and lower delinquency rates on credit accounts, according to a FINRA Investor Education Foundation-funded study.

What Are Financial Wellness Programs?

Financial wellness programs are employer-sponsored programs that help employees regain control of their personal finances. It’s become a popular employee benefit in recent years as the effects of financial stress on employee performance have become more clear. The 2018 Employee Financial Wellness Survey by PwC found:

25% of employees report that issues with personal finances have been a distraction at work
43% of employees of those distracted by finances at work spend 3 hours or more at work each week thinking about or dealing with issues related to their personal finances
11% of employees occasionally miss work due to financial stress

Employees were also asked to complete the sentence “My employer financial wellness program has helped me…” and here’s what financial wellness programs helped them accomplish:

41% got their spending under control
39% prepared for retirement
31% paid off debt
27% saved for major goals (home, education)
23% better managed their investments/asset allocation
12% better managed healthcare expenses or saved for future healthcare expenses

Once employees have the financial literacy they need they can reduce financial stress, start reaching their savings goals and spend less time worrying about money at work.

First Look at the Future of Financial Wellness

by LizStevens | Sep 5, 2018 | Blog

Financial wellness has generated a lot of buzz recently and with millions of dollars pouring into FinTech development it’s time to take the first look at the future of financial wellness through the lens of a recent Senate hearing.

On August 21st the Senate Health, Education, Labor and Pensions Subcommittee (HELP) held a hearing on Primary Health and Retirement Security. It featured a roundtable discussion on “Financial Literacy: The Starting Point for a Secure Retirement” that focused on the effectiveness and future of employer-sponsored financial wellness programs.

“Although we are in the early stages of assessing the impact of these programs, we are seeing encouraging results in terms of both engagement and the actions individuals take to improve their financial wellness after engaging with digital and/or on-site financial wellness services,” Vishal Jain, a VP in Prudential Financial’s Workplace Solutions Group, testified.

Lynn Dudley, SVO, Global Retirement & Compensation Policy at the American Benefits Council noted the areas in which companies are seeking to help their employees. In addition to helping employees deal with student debt and setup education savings programs for their children, like Section 529 plans, employers are also helping employees develop emergency saving funds (since roughly half of Americans can’t afford an unexpected expense like an emergency transmission repair). Dudley also mentioned the recent IRS private letter ruling that might make it easier for more companies to help their employees with student debt.

Scott Astrada, Federal Advocacy Director at the Center for Responsible Lending, was critical of payday lending programs because consumers can easily become trapped in a cycle of debt that affects their retirement savings efforts. Interest rates on payday loans can be as high as 400 percent on an annual basis. Astrada believes state interest rate caps could offer some relief to those who utilize payday loan services.

Future financial wellness programs will take advantage of technology to streamline communications. Specifically, the electronic delivery of retirement plan documents could enhance benefits communications.

“In particular, legislation that further encourages and facilitates the use of auto-enrollment and auto-escalation can enhance both retirement plan participation and savings rates. And, provisions that remove impediments to the inclusion of guaranteed lifetime income solutions as part of a retirement plan can better ensure employees have access to the products they need to effectively manage investment and longevity risks during their retirement years,” Jain testified in support of the Retirement Enhancement and Savings Act (RESA) and further legislation.

Helping Employees Get Smarter About Money

by LizStevens | May 9, 2018 | Blog

Your employees need help!

When asked to grade their financial literacy on a recent Equifax consumer survey 33% of consumers 18-29 gave themselves a ‘C.’ Ninety percent agreed there was a need for more personal finance education.

The results of this survey indicate that your employees lack confidence in their ability to manage their own money. By providing resources employees can utilize to improve their financial know-how you accomplish more than just boosting morale – you improve productivity. And by demonstrating you’re sensitive to the issues they face which improve retention.

Resources that help employees understand financial topics like credit scores, credit cards, debt repayment, budgeting, and student loans can make a big difference to your employees and to your company.

FSA and HSA Use Increases to Meet Employee Financial Wellness Needs. Flexible spending accounts (FSA) and health savings accounts (HSA) help employees prepare and pay for healthcare expenses. Here are their benefits and differences.

Rethinking Internal Memos in Social Media Age. Before you hit send on any internal communication consider how the public might react. See the list of what not to do.

Employee Wellness Expansion. In the next 3-4 years 67% of companies plan to expand employee wellness programs to include stress management and financial wellness. See what else is in store.

Self-Funded Health Insurance. Smaller employers are reducing costs, gaining plan flexibility, and keeping employees happy by self-funding health insurance. See if it’s a viable option for you.

Lowest Unemployment Since Clinton Administration. The April jobs report indicates that unemployment might soon fall below 4%, the lowest it’s been since 2000. Here’s what the experts say.

Legislature Proposed in NYC to Give Employees Right to Disconnect. Most employees have access to their work from their devices and as a result often find themselves doing work from home. A bill proposed in NYC aims to limit communications after work hours to maintain separation between work and home life. Find out more.

Include Managers in Wellness Program Decisions. Employee engagement in company sponsored wellness programs remains low. Research suggests managers are the key to increasing employee engagement. Here’s how.

Is your employee compliance training effective? Harassment and discrimination compliance training is shifting towards an ongoing process that is evaluated and refined so that it becomes an active part of cultivating company culture. Learn more.

Have something to add? Email info@bestmoneymoves.com.

Will Increasing Financial Literacy Reduce Overall Financial Stress?

by LizStevens | May 2, 2018 | Blog

Financial Literacy Can Reduce Overall Financial Stress and Increase Financial Wellness, Survey Says

Nearly 90 percent of Americans believe financial literacy courses should be a high school graduate requirement. An annual consumer survey highlights growing concerns about financial stress. The survey, which was conducted by Equifax, follows a 2017 American Psychological Association study that found money to be one of the top stress-inducing concerns for Americans.

When consumers from the Equifax survey were asked to grade themselves on their basic level of financial literacy, only 39 percent of surveyed consumers gave themselves a “B”, while 33 percent of consumers between the ages of 18-29 gave themselves a “C.”

Because so few Americans get financial literacy classes in high school, Equifax will make financial information and education more accessible to its consumers. Dann Adams, president of Global Consumer Solutions at Equifax, said the company will provide “the fundamentals and basic credit essentials to help consumers establish the right habits early on.”

“We want to help consumers get to an ‘A’ grade, which is why we’re studying and offering new ways to help them improve their financial literacy grade,” Adams added.

Should Financial Literacy Be Required For Graduation?

Currently, each state sets its own requirements for high school graduation, although there are federal guidelines. While few states currently mandate financial literacy, some 30 percent of states are already looking for ways to incorporate financial literacy into high school curriculum.

What Are Results of Financial Literacy Education?

In schools where a full semester of financial literacy was required a FINRA Investor Education Foundation report card showed significant improvement in credit scores for young adults aged 18 to 22. A separate study conducted by Ohio State University’s Center for the Study of Student Life found that students who had completed financial literacy courses are less affected by financial stress.

What If Your School Did Not Offer Financial Literacy Education?

While more students in the future will likely receive financial literacy education, what about adults? “Consumers often think that because they didn’t do well in high school math, that they can’t manage their finances, but that’s just not true,” said Ilyce Glink, CEO of Best Money Moves, a mobile-first financial wellness app that helps people measure their level of financial stress.

“I believe that everyone can do about 95% of whatever they need to do with their money themselves. You don’t need a professional to help you figure out a budget or shop around for car insurance to get the best deal. You can easily learn to implement those cost-saving and financial management strategies yourself,” she said.