What Your Millennial Employees Are Saving For And How HR Can Help
Millennials, defined by those born between 1981 and 1996, are the largest generation in the workforce today, numbering about 73 million in the United States. By 2025, they will make up 75% of the global workforce. While much has been written about millennials and money, an employer’s perspective is important since this demographic will be key to business success.
The COVID-19 pandemic pushed Americans’ personal savings rate to a record high of 33% in April 2020. The rate has since gone down, but it is still above pre-pandemic levels for those employed. Americans often increase their savings whenever they experience economic downturns, and last year was no different. Overall, American workers―including millennial employees―are experiencing high levels of financial stress, which can impact productivity and engagement, especially in a remote work environment.
So what are your millennial employees saving for and how can you help?
In a survey by Truist, the top three savings goals for millennials are debt payment, travel, and saving for retirement. Notably, these three goals are ranked higher than traditional ones, such as homeownership and starting a family. Millennials are the most educated generation, yet the high cost of college has also made them the most indebted. Paying off debt can alleviate financial stress caused by the economic downturn. Although the pandemic has disrupted travel, millennials still rank it high as they believe that spending money on experiences brings more happiness than spending on material possessions. This demographic will likely be the first to resume travel once the pandemic is under control. As it relates to retirement, 26% of millennials don’t believe social security will be available to them at retirement age, making personal savings for retirement a requirement.
Financially confident employees tend to be more productive and engaged, so how can HR leaders increase their millennial employees’ confidence in reaching their financial goals?
Invest in Financial Education
As people learn more about personal finances, it’s common to hear, “I wish they taught this in school!” Topics like taxes, interest rates, compound interest, and investing are part of everyday life, yet very few Americans were taught personal finance in high school. Although more and more states are now requiring personal finance education in high school, many millennial employees still need to increase their financial literacy.
HR leaders can listen to their employees and ask them what financial topics they are most interested in learning about. Work with existing or new financial wellness vendors to cover issues that are important for your employees.
Encourage Automatic Savings
One of the most effective ways to save money is to automate it so you don’t have to think about it. 401(k)s work this way. Employees put in a percentage of their paycheck to contribute and cannot spend the money since they don’t see it. Did you know that employees can do this for all their financial goals, not just retirement?
For example, a millennial employee wants to set aside $3,000 to travel in 2022 when the pandemic ends. Through a direct deposit, she can choose to set aside $250 from her paycheck per month to go straight into a separate savings account she’s created just for this goal. Because she doesn’t see this money in her regular checking account, she is much less likely to spend it and jeopardize her goal.
HR leaders can make a difference by encouraging employees to use this often-overlooked feature to achieve their financial goals. What boosts financial confidence more than seeing your bank account grow?
Implement An Employee Financial Wellness Program
In 2021, employee financial wellness programs are no longer a “nice to have” benefit―they are a strategic imperative. Point solutions such as 401(k) plans and group life insurance are only pieces of the puzzle, but a Total Financial Wellness program is the complete picture that guides you through your life’s financial journey. It brings all your benefits together and makes them relevant to your employees and their financial lives.
The same employee with the $3,000 travel goal, for example, might also have $20,000 in student loans and would like to save for retirement, but is not sure if she should contribute beyond the employer match. A Total Financial Wellness program will guide her through these questions and address what she needs to save for each goal taking into account all the benefits her company offers.
Is your company looking to offer a financial wellness program but you’re not sure where to start? Check out our Buyer’s Guide that details what you need to know when evaluating financial wellness solutions.
Helping your employees reach their financial goals is one of the most rewarding actions you can take as an HR leader. It’s also a win-win for both employers and their employees. Financially confident and happy employees tend to be more productive and engaged, benefiting the employer’s bottom line and delivering business results in the long term.