Transcript Tom Garman`s Thoughts on Employee Education

“Workplace Financial Programs Are
Profitable When Done Right”
The Business Case for Financial Education
Presented by
Dr. Tom Watson
Watson Training & Development
©
Watson Training & Development, 2009
Employees are NOT Saving Enough for Retirement
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Only 14% of eligible workers contribute to IRA accounts
Only 42% of workers save for retirement, including
401(k)s
Only 53% of workers participate in any retirement plan
Only 60% of full-time employees have access to an
employer-sponsored voluntary retirement plan
70% are not saving enough for a
financially successful retirement
Average 401(k) balance = $50,000
Median 401(k) balance = $19,000
Employee Personal Financial Challenges in
Retirement Saving
 Participation in retirement savings
plans are inadequate
 Most are not saving enough for retirement
 Workplace education and advice programs have been underutilized
 Millions of employees say they cannot afford to save for retirement,
and 1 in 4 say credit card debt is a reason
 Employees do not know how to help themselves
 Employers do not understand the value of providing their employees
easy access to the best mix of quality financial programs
Employee Personal Financial Problems
Surveys
80% - worried about their personal finances and think financial times
will get worse
60% - trouble making ends meet
37% - no emergency fund
$392 – average savings balance
10% - delinquent in bills
4 million – IRS garnishments
16 million – unpaid utility bills
15 million – calls from collectors
More news
 401(k)s are being tapped to save homes
 $4 gas is a reality; $5 may be next
Employee Personal Financial Problems
“70% live paycheck-to-paycheck and do not save enough for retirement”
• Credit card payments ($11K)
$330-$430 month
• Vehicle payments ($15K)
$400-$500 month
• College loan payments ($30K)
• Savings
$400-$600 month
$33 month
 Child-care ($5-$21K)
 Property taxes
$400-$1200 month
$
 Homeowner’s insurance
$
401(k) portfolio balances
Because millions of investors are poorly diversified
“Don’t give employees a raise! Offer help with money management challenges”
Employee Personal Financial Problems –
Millions of Financially Unhealthy Workers
30 million American workers –1 in 4 –
report they are seriously financially
distressed and dissatisfied with their
personal finances
Employee Financial Illiteracy is an
Employer Problem
Over 80 research studies prove that
employee personal finances and the
employer’s bottom line go together
Research proves that:
“Employees with money problems are like
sharks swimming around the workplace
taking bites out of the bottom line”
Employee Financial Illiteracy is an
Employer Problem
“Every time someone on your
work team brings his/her
money worries to the job,
workplace productivity drops”
“Employers ignore the elephant”
Employee Financial Illiteracy is an
Employer Problem
“Financially unwell
employees do not
make the best decisions
for themselves…
or their employers”
Employee Financial Illiteracy is an
Employer Problem
Research shows:
30-80% of ALL workers
waste time at work on
money issues
How much time?
12 – 20 hours per month
Employee Financial Illiteracy is an
Employer Problem
 Financially Illiterate adults do
not manage their personal
finances very well…
 And they do not save and
invest enough for a financially
successful retirement
 THIS contributes to lower
productivity as well as higher
health care costs
Employee Financial Illiteracy is an
Employer Problem
Employers Often Recognize These Issues…
But Do Nothing.
“You can lead a horse to water, but you can’t make it drink”
Employer Costs: PFEEF Research Shows that
Health and Personal Finances are Correlated
Employees with financial distress report poor health.
Financially distressed employees have worse health than other workers.
40 to 50% of financially distressed workers report that financial problems
caused their health woes.
1/3 of professional employees say are so sad or down they couldn’t
perform job tasks due to financial distress.
Positive changes in financial behaviors are
related to improved health.
Employer Costs: Annual Cost to Employer for
Ignoring One Worker’s Financial Illiteracy©
©
Personal Finance Employee Education Foundation, 2009.
1. Lost productivity for each financially unwell
employee
$450
2. Higher health care cost for poorer health 300
Subtotal = $750
3. Lost employer FICA savings on worker who does not
join health care reimbursement (FICA)
92 (cash)
4. Lost employer FICA savings on
dependent care reimbursement (FICA) 382 (cash)
5. TOTAL COST TO EMPLOYER
$1,200+
“Employer cost for not providing basic financial education that changes
behaviors and job outcomes is $750 to $1,200+ per employee!”
Quality Financial Programs Result in Improved Employee
Personal Finances and Employer’s Bottom Line
Quality Workplace Financial Programs
Rescue Employees and Employers by
1. Decreasing
employee personal
financial distress
2. Increasing
employee personal
financial wellness
What does NOT reduce employee financial
distress and increase financial wellness?
Salary increases? No
Bonuses? No
Most retirement education workshops? No
Employee Assistance Programs? No
Marriage counseling? No
Quality Financial Education? Yes
Credit Counseling? Yes
Quality Programs Emphasize
“Basic Financial Literacy”
This is knowledge about
• Spending Plans
• Credit Management
• Savings
“AND The lack of financial literacy is the major
reason why employees do not save for retirement”
Quality Programs Result in Financially Literate
Employees Who are Engaged with Money Issues
• Comparison shop
• Achieve savings goals
• Enjoy average to above
average financial well-being
Human resources professionals can help make this happen
Quality Financial Program Result in
Improved Employee Financial Wellness
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Lower financial distress
Increase financial well-being
Better health
Retirement preparation
Improved family relationships
Gains in job performance
“It makes a difference to that one!”
Quality Financial Programs Result in
Improved Employer Profits
“Employers do not realize they can
improve profits
–and prove it–
by helping employees improve personal
financial behaviors”
“It makes a difference to that one!”
Quality Financial Programs Result in a
Positive ROI for Employers
 Return on Investment (ROI):
The Personal Finance Employee
Education Foundation expects
employers typically will receive a
ROI of 3:1 (or more) annually
for quality financial programs
 Example:
Cost: $1500 invested in financial
programs by employer/employee
Benefit: $4500
ROI = 3:1
One Year Projection of the
Changes in 10 Variables
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Less work-time spent on personal finances
Less absenteeism
Reduced turnover
Improvements in job performance
Lower health care costs
Health care premium savings
Employer’s FICA savings for more employees in health
care spending plan
8. Employer’s FICA savings for more employees in
dependent care spending plan
9. Fewer workers’ compensation claims
10. Fewer garnishments
Conclusions about Employee
Financial Literacy and Employer Profits
It is in the employer’s best interest—more profits—to provide
employees easy access to quality financial programs
“It also is the right thing to do as stewards of
employee well-being!”
Companies Offering Our Financial Wellness Program
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Eastman Chemical Company
Neiman Marcus
Exxon/Mobil
Xerox Corporation
Citibank
Harris County
City of Houston
Alcatel Corporation
U.S. Navy
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Ernst & Young
Texas Dept of Agriculture
Methodist Healthcare System
Texas Bank & Trust
General Dynamics
U.S. Air Force
UPS
Triad Health Care
And 100’s of others
Our program is available as a live seminar, an online
four month study course, in book form and on CD.
It is Guaranteed to Improve Employee Financial
Wellness and Your company’s Bottom-Line
www.ThePayRaiseProfessor.com
Dr. Tom Watson
903-758-0855
[email protected]