Using Financial Education to Overcome Inequalities

“The well-known business argument for financial wellness programs is the payback of at least $3 for every $1 invested by increasing worker productivity and retention,” said Rebecca Sudano, senior vice president and partner with BDO Canada Limited. In addition, financial wellness programs can be a way for employers to help participants overcome financial and social inequalities. The following excerpts—from a Q&A with Sudano in the November/December issue of Plans & Trusts—can help employers define financial wellness, discover common denominators in financial literacy, create an engagement strategy, and assess concerns and successes.

Using Financial Education to Overcome Inequalities

What does financial wellness mean?

Financial wellness is a broad term: It connects a person’s finances with their overall well-being, including their state of mind and health. The approach goes beyond the numbers and integrates a person’s overall relationship with money. Financial wellness extends to lifestyles, goals, dreams and even values.

Financial education in the workplace, however, needs to be structured and focused, with room for participant feedback. Financial wellness programs should accommodate and cater to different backgrounds to help participants learn the basic tools, habits and behaviors needed to achieve financial goals and continue learning long after the program has finished.

Why is now a critical time for financial wellness programs?

Canadian Investment Institute Virtual Conference

Because of the pandemic, there has been a surge in the discussion around financial wellness—the need for an emergency savings fund, on a micro level, and also the need for a social safety net. But the financial issues we’re seeing are not solely related to COVID-19. The protests that have rocked the U.S. and the rest of the world remind us of how systemic privilege truly is—and financial privilege is a big part of this equation. Financial wellness programs in the workplace are an opportunity to help remedy some of these financial and social inequalities.

What are some common denominators in financial literacy?

Budgeting and expense tracking are common topics, though I prefer the term spending plan. If I’m going to earn the money, I want to be able to spend it the way that I choose to spend it. Budgeting sounds like I’m on a money diet and I don’t have the ability to choose where my money goes.

Other common needs for education are around short-term savings, good debt vs. bad debt, compounding interest and living within your means—in other words, weighing needs against wants. This may sound simple, but it’s a fundamental part of making sound financial decisions. During the pandemic, when consumer spending was reduced to a minimum, many people were able to learn what truly constitutes a want. It’s important not to forget this lesson.

How can employers create a meaningful engagement strategy?

There are lots of ways to address your audience, but you have to know who your audience is. The workplace is a diverse and multigenerational environment with a variety of financial concerns. For example, if you are trying to reach a Millennial audience, you might talk about post-graduation finances, automotive expenses, renters’ insurance and discretionary overspending on items like food delivery and travel.

It can be valuable to conduct research to reveal an array of financial goals, challenges and blind spots as well as content and delivery preferences. Curriculum design also has to perform the balancing act between the information with the widest appeal and the information that certain people need to hear the most. It’s preferable and ethical to tailor content to the people who need it most. Financial literacy programs in the workplace can help chip away at financial inequalities.

Are there any concerns with financial wellness programs?

Employers need to be careful from a liability perspective. Financial wellness programs should focus on teaching participants the basic concepts and the how-tos of money management rather than providing personalized financial advice. That said, employers should explain how participants can find objective, impartial guidance from fiduciaries or other trustworthy sources of information.

One-on-one meetings are beneficial but can be difficult to implement because they often go above and beyond an organization’s objectives and resources. Partnering with financial service providers, financial coaches or other industry leaders can be a way to reinforce resources, offer free one-on-one meetings and help employees create an action plan. But employers should establish a clear framework for any type of third-party advice.

[Upcoming Webcast for Canadian Plan Sponsors: Designing a Financial Wellness Program for Employees During and After the Pandemic | December 1, 2020]

How can employers assess success?

Because those in need should take precedence in financial wellness programs, participation rates should not be the sole measure of success. When deciding on content, focus on what your program is intended to do.

Too many organizations don’t take employee feedback into consideration. Follow up with individuals. Organizations could solicit feedback by surveys, text messages and individual meetings. The most advantageous way of soliciting feedback is one-on-one meetings because they will give you much more insight into how to edit your program and make sure it’s what people are looking for. Also, celebrate participants’ successes along the way. Small victories can lead to big success. It’s not about having lots of money. It’s knowing how to manage it.

Learn More

Find financial education and retirement security resources for Canadian plan sponsors here and for U.S. plan sponsors here.

[Related Reading: Three Steps Plan Sponsors Can Take to Bolster Retirement Security]

Robbie Hartman, CEBS

Robbie Hartman, CEBS
Editor, Publications, for the International Foundation

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