I ran across this article from the Center for Financial Security at the University of Wisconsin-Madison about “Workplace Financial Education’s Effects on Retirement Planning.” Whether you’re an employer or employee, it’s worth a read.
The gist of the article is that organizations have moved away from providing fully funded retirement programs, placing the responsibility for retirement planning in the employee’s lap. But employees aren’t stepping up their savings strategy. According to the Employment Benefit Research Institute (EBRI), one in four workers has less than $1,000 saved for retirement. This is despite efforts by employers and the government to make saving more attractive with matching contributions and tax advantages.
But one thing the University of Wisconsin article did mention was effective was workplace financial education.
Organizations that are offering employees access to financial education tools are seeing increased retirement account contributions. They’re also saying that employees feel their personal knowledge of budgeting and savings has increased as well.
As a general rule, we don’t learn about financial planning in high school or college. The primary place we learn about budgeting, saving, and managing money is either through friends and family … or at work. So, if organizations are going to give responsibility for retirement savings to employees, shouldn’t they at least provide a bit of financial literacy?
Financial literacy programscould easily be incorporated into the company’s wellness and well-being programs. The cost of providing a program would be significantly less than the savings from eliminating the company’s pension plan. I don’t know exactly how much, but I do think we can logically get to this conclusion.
Organizations want employees to do their best work. They won’t be able to if they’re worried about saving for retirement. Offering financial education is a way to help employees accept responsibility for future.
Meanwhile, if organizations do provide financial education, it’s up to employees to participate. You’re never too young to learn about retirement savings. When I was in school, and received my first Social Security card, I was told the Social Security program was designed to supplement my retirement savings. Keyword: supplement.
I don’t know what’s going to happen with pension plans or Social Security. I do know that it couldn’t hurt to start putting a retirement savings plan in place. Whether you’re an organization or an individual, financial education makes sense. Because the more educated we are about our finances, the easier it will be for us to start saving for the future.
Image captured by Sharlyn Lauby while exploring Las Vegas, NV