Considerations for Employee Financial Literacy Programs

July 11, 2014 ( – Financial literacy programs can help employers get  employees more engaged in smart decision-making and planning for their retirement.

People have a great deal of information competing for their attention; they are subject to ever-increasing bombardment, Bellaria Jimenez, managing director of MetLife Solutions Group, tells PLANSPONSOR, noting that the Internet is a special contributor. “The more accessible information is, the more complicated our world is,” she says. “People are confused.”

Plan sponsors have a chance to make a difference by educating their workers so they can meet their goals, and one way to provide education is through a financial literacy program. As well as helping people understand investments, Jimenez says, these programs help participants deepen their understanding of finance and the reason for good financial behaviors. They learn why they’re allocating money for the future, and how it ties into their own goals and considerations.

Personal circumstances can be varied, and they add to the complexity of decision-making, Jimenez says. Through financial literacy programs, participants learn to view their individual situations and weigh the best financial decisions unique to their families. Personal feelings about investing, risk tolerance and time horizon are factors to examine, as well as family circumstances—from single parents, to those caring for aging parents as well as young children.

Jimenez points out that financial literacy and financial wellness are not identical though they may share some features. Financial literacy serves individuals who need an overview of financial basics. Jimenez says literacy for all types of people can be provided, from people who need to know how to open a bank account to those who are trying to understand a specific goal and how to fund it, such as saving for education.

Financial wellness programs are for those people who already have a grasp of the basics but are not sure how to bring their awareness to the next level, Jimenez says. “Someone could do a great job of saving, but they never thought about insurance needs,” she says. “It’s looking at the full spectrum to keep the financial health of that household, including saving for retirement and having the right protection.”

Plan sponsors can assess financial literacy programs on several fronts. Look for a program that really provides participants with a full financial picture, Jimenez says. The program should also be specific to the demographics of the group. For example, information technology firms or departments tend to have younger employees, and they may not be particularly open to learning much about retirement. This group might be more interested in learning about financial health.

A plan sponsor might want a financial literacy program that focuses on retirement planning, but helps participants understand their entire financial picture and not just investment selection. A good program will help them factor in other assets, such as a pension or Social Security benefits.

What does the organization’s work force need? Jimenez asks. Some financial education programs are geared toward women, who tend to have more interruptions in their careers. Stopping work for a time can create some financial challenges; a financial literacy program can address what strategies women can use to protect their finances, such as continuing to save in a spousal individual retirement account (IRA), or making contributions to their own IRA, if working part-time. Participants can gain some understanding about how Social Security will be affected if they leave the work force.

Providers of financial literacy programs usually have a product to sell, and the plan sponsor should do their due diligence about the organization in order to really know the products and the firm’s track record. Jimenez suggests that a good question for a plan sponsor to consider is, “Are we trying to just provide a product for employees to set money aside for retirement? Or do we want an organization that fully supports what they do with education for participants?”

Jimenez recommends asking providers for literature about their financial literacy program as well as an example of the education it would provide, given the specific demographic of the employees.

If the plan sponsor is approached by a provider offering financial literacy, Jimenez says it is reasonable to ask for a sample presentation. If the plan sponsor uses more than one provider, companies should be asked how they would keep a program neutral so employees are not pushed unfairly in one direction to purchase products.

Many people turn to their employers because they’re short on time to figure out financial information on their own. As an added value to the employee the plan sponsor can offer programs that help shore up participants’ financial understanding. “Life is happening around us,” she says. “It’s hard to stop the clock and say, ‘I have to plan.’"