Financial Education Over Time Improves Savings Behaviors

An analysis finds repeated use of financial wellness resources improves retirement savings behaviors.

Financial wellness education is becoming popular at many workplaces.

Financial Finesse says employers offering an online financial learning platform since 2010—when the firm’s tool was originally launched—have seen registrations grow 59% annually, and overall usage grow 69% annually since then.

“We see hopeful signs that employees are becoming more proactive, especially those who are making regular use of the financial wellness program offered by their employer,” Cynthia Meyer, resident financial planner for Financial Finesse, based in Gladstone, Connecticut, tells PLANSPONSOR.

According to Financial Finesse’s 2014 Year in Review, repeat users made up 15% of all users in 2014, up from 6% of all users in 2013. These employees show improvement in key areas of financial wellness that is far above the improvement seen in the general population.

Forty-six percent of repeat users indicated in their last assessment that they feel confident their investments are allocated appropriately, compared to 31% in their first assessment. Nearly one-third said they know they are on target to replace at least 80% of their income in retirement, compared with 17% who said so in their first assessment. Forty-seven percent reported that they regularly rebalance their investment accounts to keep their asset allocations on track, versus 35% who said the same in their first assessment.

Repeat users are also seeing significant progress in handling bills and paying down debt, Meyer says. “Multiple touches build a pattern of success over time.” She explains that as employees get more financially self-reliant and get control of their monthly cash flow, they increase saving for retirement.

The Year in Review report shows three-quarters of questions received by Financial Finesse’s team of Certified Financial Planner professionals were proactive in nature, seeking guidance about long-term financial planning issues such as saving for college and retirement, rather than dealing with short-term issues like losing a job or facing foreclosure.  Retirement planning continues to be the main focus, accounting for 35% of all questions received in 2014, and up four percentage points since last year.

COMING UP: How report findings can inform targeted education.

Another finding of the review that Financial Finesse finds encouraging, according to Meyer, is that the program seems to be reaching the demographic that is most vulnerable to financial issues. Employees with household incomes below $35,000 saw improvements in cash management, which has led to improvements in debt management, fewer 401(k) loans and hardship distributions (23% in 2014 vs. 29% in 2013), reduced stress, and a greater feeling of control over their financial situation. “This is the first time we’ve seen good movement in those numbers,” Meyer says.

She notes that some of the review findings reveal an opportunity for employers to tailor certain financial wellness messages to address challenges of different employee demographic groups. For example, 70% of African Americans and 62% of Hispanics identified managing cash flow as a top concern, and both of those demographics reported that getting out of debt is a top concern. Retirement plan participation is also lower for those demographic than for Asian America or Caucasian employees.

Women were less likely than men to say they have a handle on their monthly cash flow (66% vs. 80%); they know they are on target to replace at least 80% of income in retirement (17% vs. 24%); they have a general knowledge of stocks, bonds and mutual funds (67% vs. 84%) or they feel confident their investments are allocated properly (34% vs. 48%).

In addition, employees younger than age 30 listed cash flow and debt management as top financial priorities. For employees ages 30 to 44, the top two priorities are retirement planning and cash flow; for employees ages 45 to 54 , they are retirement planning and debt management; and for employees ages 55 and older, they are retirement planning and investing.

The full Year in Review report is available here.