Employer-provided financial wellness programs go a long way toward helping workers, especially younger workers, feel more confident about their finances, several recent studies show.
According to the 2022 TIAA Financial Wellness Survey conducted last fall with more than 3,000 U.S. adults, just 22 percent of Americans rate their financial wellness as high. Generation Z workers, born from the mid- to late-1990s through the early 2010s, had the least positive view of their financial well-being: Only 12 percent rated their financial wellness as high.
“Employer-sponsored financial wellness support is both needed and wanted by employees, especially for workers who might need help the most,” said Snezana Zlatar, senior managing director and head of financial wellness advice and innovation at investment services firm TIAA. “People who have taken part in an employer financial wellness program can see a considerable difference, indicating that it truly makes sense for employers to redouble their activities on this front.”
Financial wellness programs focus on issues such as retirement, emergency savings, debt management, budgeting, health care cost management and prudent investing, Zlatar said.
“It’s hard for employees to focus on their retirement when there are more-immediate pressing needs,” she noted. “The most impactful financial wellness programs help address both short-term and long-term goals since they are linked together.”
Employer Responsibility and Roadblocks
Over half of the survey respondents—and 65 percent of the Generation Z respondents—agreed that employers have a responsibility to help employees improve and maintain their financial wellness.
Even so, about 3 in 4 workers (especially among Generation Z) had reservations about using that support. Hidden costs or fees and not wanting to disclose finances or financial issues to their employer were among the reasons why.
“It’s natural for employees to have questions about cost and confidentiality,” Zlatar said. “It simply means that employers need to assure employees that the guidance is offered purely in their best interest as part of the employer’s comprehensive financial wellness support.”
Financial Stress Affects Work
Stress about finances has an outsized effect on the ability of Generation Z and Millennials (generally those born from the early 1980s to the mid 1990s) to do their jobs, according to Schwab Retirement Plan Services’ annual 401(k) Participant Study. Almost half of Generation Z workers (44 percent) and 38 percent of Millennials reported that financial stress affected their ability to work over the past year, compared with 24 percent of all workers.
The Schwab survey of 1,000 employed Americans was conducted in mid-2021.
“Generation Z workers are just starting their careers at a time of upheaval at home and in the workplace—from new health and safety challenges to the rapid expansion of virtual offices and dramatic swings in our economy and markets,” said Catherine Golladay, head of Schwab’s workplace financial services. “It’s a stressful environment, and young people are looking to their employers for support. The labor market is tight, and companies have an opportunity to attract and retain talent by providing tools and resources that help workers manage their money.”
Members of Generation Z and their Millennial colleagues also have a higher degree of interest than older generations in financial benefits beyond the 401(k), including emergency savings accounts and tuition reimbursement, the survey showed.
A Long-Term Approach
Most Generation Z savers who participate in workplace plans are taking a long-term approach, making steady contributions and not changing their asset allocations based on short-term market events, according to a Fidelity Investments November 2021 analysis of savings behaviors and account balances of more than 30 million retirement account holders.
Many Generation Z workers are automatically enrolled in their workplace 401(k) or 403(b) plans and defaulted into a target-date fund, Fidelity reported, and 86 percent of Generation Z workers hold all of their savings in a target-date fund.
“It’s encouraging to see so many young people planning for their future,” said Kelly Lannan, vice president of young investors at Fidelity. Members of Generation Z and Millennials “may get an undeserved rap that they are mainly ‘living in the now,’ but we know [from our research] that retirement is the No. 1 long-term goal they are trying to reach.”
When engaging Generation Z workers around financial wellness and retirement savings, Fidelity advised, keep these pointers in mind:
- Go digital. Generation Z workers are the most likely to say they turn to social media influencers to educate themselves on investing. “They are not only mobile-first, they’re chat-first,” Fidelity noted. Consider whether the experience you’re serving up is digital and streamlined and allows for easy, two-way communication.
- Auto-enroll new hires and annually raise their savings rate. Among plans that offer auto-enrollment, 91 percent of participants don’t opt out. Consider setting the default savings rate for new hires at 6 percent or more and offering an auto-increase program to raise their contribution level by at least 1 percent each year.
- Amp up education. Make the most of Generation Z’s willingness to learn by helping them build foundational skills, such as creating a financial plan, saving for an emergency using a separate “rainy day” fund and taking advantage of the company 401(k) match.