Bob Armour is CMO at Jellyvision, makers of interactive benefits counselor ALEX. Views are the author's own.
Most company financial wellness programs are guides on "how to slice your pie," fixated on telling employees how to spend their paychecks. They explain how to budget, how much to save in an emergency fund and maybe — just maybe — how to pay off student loans before retirement.
When you tell someone how to slice their pie, it's usually well-intentioned. It means you want them to make good decisions, feel secure and build a comfortable future.
Unfortunately, it doesn't work very well. It's hard to know if your message is heard, and it's even harder to measure its impact. If most employees are on a high-deductible health plan, you have much more effective tools at your fingertips — tools that can help your employees save real money and build for a better future.
Here are three ways you can use your position as a benefits provider to make a real difference in your employees' financial health:
1. Give financial benefits guidance center stage
There's an ocean of financial advice out there, much of it dispensed by charismatic money gurus like Dave Ramsey, Suze Orman and Tony Robbins. When it comes to budgets and saving strategies, these popular figures carry a lot of credibility, and trying to compete with them is an uphill battle.
But when it comes to pre-paycheck tax-saving accounts — like an HSA or an FSA — you carry a lot of credibility. Public awareness of these accounts is critically low, and employers are uniquely positioned to fill that vacuum. You're providing the benefit, so employees rely on you to explain how to use it.
The best part about focusing on pre-paycheck savings is being able to measure exactly how much impact you're having. You have all the data: enrollment and contribution rates, balances, investment rates, education tool usage and tax savings. You can see what's working, what's not working and when it's time to tweak your approach.
2. Rebrand open enrollment as an annual financial check-up
Deadlines and consequences are essential when motivating people to do something. Without them, many will put the task off forever. That's why most financial wellness programs are toothless: It's great advice, but most employees will just hit the snooze button — over and over and over.
Open enrollment is a unique window during which employees are required to make big financial decisions before a deadline, or face serious consequences. It's in this window that they choose how much money to put into their 401(k) or HSA for the rest of the year. A good choice will protect them from unexpected expenses and help them build toward a comfortable retirement. A bad choice will leave them vulnerable to huge bills, financial stress and an uncertain future.
This is your window to have a huge impact on your employees' financial health for the rest of the year. Communicating the value of these pre-paycheck accounts will dramatically improve the chances that employees take action. And not only does that help employees, but it also reduces your company's payroll taxes.
3. Provide holistic, unbiased financial advice
The financial reality a lot of Americans face is stark. Forty percent aren't able to handle a $400 unexpected expense, according to a report from the Board of Governors of the Federal Reserve System. Baby boomers are seriously underfunded for retirement. HSAs are significantly underused and misunderstood.
Disparate advice compounds the problem. HSA, 401(k), and financial wellness vendors offer financial advice, but that advice tends to be heavily biased toward the thing they're offering — which comes as little surprise. But most employees have nowhere to go to learn how these different accounts and programs relate to each other or fit into their specific financial situation. It winds up feeling like every piece of advice comes with a price tag.
Companies can make a tremendous difference in the lives of their employees by giving them access to unbiased financial advice tailored to their personal needs, goals and situations. Matching every employee with their own personal financial advisor isn't usually in the budget but, fortunately, there's still something you can do.
At Jellyvision, we call this helping employees decide how so spend their "next best dollar." It means taking the employee's whole situation into account, and then helping them figure out the best place to put their next dollar. Here's one approach you might suggest:
- Priority 1: Emergency Fund. If you don't have an emergency fund with at least $400 in it, put every available dollar you have toward building that as quickly as possible. Being able to handle a surprise $400 bill without using a credit card can save you thousands.
- Priority 2: Retirement Match. Once you have an emergency fund, check if your company has a retirement savings match. If they do, put every available dollar you have into that retirement savings account until you're getting the full match. That's an immediate 100% return on every dollar, which is a better rate or return than any other investment or debt payoff.
- Priority 3: High-interest debt. Once you have an emergency fund and you're getting the most from any retirement savings match, you might consider paying off credit card debt. The key here is the interest rate on that debt. Most credit cards have an interest rate of 15%, so each dollar you use to pay down that debt is basically giving you a 15% rate of return — which gives you more money to spend next month, which lets you pay down more of the debt, which frees up more money.
On the other hand, if you have lower-interest debt — like a 5% interest student loan or mortgage — paying more than the minimum is only giving you a 5% return. If you saved that money for retirement, you might see a 9% or 10% return on that money, on top of tax savings. The key is getting the biggest return on your next best dollar, so you wind up with more dollars to spend.
Helping employees improve their financial health is an admirable goal — and a smart one, too, because financial stress can impact every aspect of their life and work.
But if you're just telling them how to spend their paycheck after taxes, you're wasting your words. Doing something different isn't easy; it requires you to shift your perspective and focus on the areas where you have more credibility, authority and transparency. But the payoff is huge.
Your employees will be able to handle sudden expenses, prepare for retirement and have a fuller appreciation of how the benefits you provide can improve their overall financial situation. And that appreciation will extend to your HR team and your company at large.
I mean, helping your employees is its own reward, but a little appreciation wouldn't hurt, would it? No, it wouldn't.