3 Ways to Turn Around Your Millennial Employees’ Finances
Larry Robinson, Chief Product Officer
The majority of Americans live paycheck-to-paycheck throughout their working years and retire without having a substantial nest egg for retirement. This pattern is especially true for millennials, who have experienced two large recessions early in their careers. The current pandemic-fueled recession is causing financial stress for everyone. Millennials are especially challenged due to a combination of high student loan debt, high unemployment and low financial literacy.
HR leaders who are managing millennials in the workplace are familiar with how financial stress affects physical and mental well-being, leading to lower productivity. But can HR leaders help turn this around for their millennial employees, helping them be more productive and engaged at work?
Far from being powerless, HR leaders have a unique opportunity to support their millennial employees by offering workplace benefits focused on financial wellness.
Here are the top three areas of financial wellness that HR leaders can invest in:
1 - Financial Literacy
The first step toward financial wellness is educating employees on the foundations of personal finance, including how to build healthy habits, how to budget, how to plan and save for retirement, and the mechanism behind investing and debt payoff. When employees have a good understanding of their finances, they will make better decisions and maximize available workplace benefits, such as retirement plans.
Offering workplace benefits that include financial education will go a long way in helping millennial employees improve their financial well-being.
2 - Goals-based Financial Plans
Once an employee understands how personal finances work, the next step is to help them create and plan for their goals. Every person should start with an emergency fund goal and then a retirement goal because both are universal. After those two goals, most employees will have other objectives such as buying a home, starting a family, saving for their kids’ college education, travel, or leaving a legacy of wealth for their children or grandchildren.
All journeys no matter how long start with a single step. The same is true with financial goals. A financial plan breaks down each goal into smaller, more concrete milestones so it no longer feels overwhelming. An employee who is 25 years old, for example, wants to retire at age 65 with $2 million in investments. Breaking it down to investing $100/month for now in her 401K and increasing this over time as she gets further along in her career, makes the goal a lot more approachable.
Workplace benefits that help with goals-based financial planning can make a difference in millennial employees’ ability to thrive financially.
3 - Smart Budgeting and Automated Investing
An impeccable financial plan won’t mean anything if an employee fails to implement it in their day-to-day life. Like all habits, good financial habits take time to cultivate. Digital tools and accountability can help employees adopt these habits.
Many digital platforms, such as BrightPlan’s, help with creating a budget and tracking spending. Sticking to a budget can be challenging, especially if the employee has struggled with managing spending in the past. An approach that BrightPlan took to address this is prioritizing savings. Each user identifies in the planning step how much money they need to save from each paycheck. The budget will then prioritize saving that amount and the employee can allocate spend on other categories with whatever money that is left over.
Automated investing takes this savings-first concept to the next level. Instead of manually transferring money out of a checking account into a savings or investment account, employees can automate this transfer every payday, similar to 401K contributions. Employees who use this feature don’t have to think about saving or investing--it happens automatically.
Besides offering financial education and goals-based planning, workplace benefits that include smart budgeting and automatic investing can help your millennial employees achieve their financial goals.
Comprehensive Financial Wellness Program
HR leaders can support their millennial employees on their financial wellness journey by offering workplace benefits that include a Total Financial Wellness solution. This solution should include education, planning, investing, and day-to-day financial management paired with experienced financial advisors to guide them in reaching their goals.