How do you create a burning platform that motivates employees to contribute fully to their company pension plan or group registered retirement savings plan (RRSP)? For many, since retirement seems well into their distant future, they choose to put off thinking about investing. For others, they fear that having delayed saving for so long, the idea of contributing now seems like a hopeless case of too little too late. In both scenarios, the employee decides, either consciously or unconsciously, not to step up and contribute.
Recognize fears and help myth bust.
It is helpful to meet employees where they are at. Yes it is true that many workers are faced with financial responsibilities that are more pressing. They have children's educations to fund, mortgages to pay down, aging parents to support, and the list goes on.
There are anxieties that workers can't rely on government sponsored pension plans like the Canada Pension Plan (CPP) and Old Age Security (OAS), but this is not necessarily the case. The concept of saving involves helping employees understand all of their potential income streams. It isn't unrealistic to help employees understand that they can expect to receive full payments from the government when they reach age 65. Funded through a payroll tax, CPP has a solid retirement platform. With OAS, it is paid out of general tax revenues and is contingent on the government in power. While it would be highly unlikely that any government would remove OAS payments because of the impact at the polls, it is less stable in some regards than CPP.
Myth busting will help remove some of the discouragement and fear felt by some employees who would rather not think about investing in their company program or are confused by government sponsored programs. Reminding them through video messages, in person meetings, town halls, e-communications and through word of mouth endorsements from influencers in the workplace will reinforce that it is never too late to start saving.
Answer the question: Why invest now?
It is helpful for plan sponsors to approach the question of, "Should I wait to contribute until I am in a better financial position and funds aren't so tight?" The answer is no and the compelling message for employees is -- the sooner you start saving by investing in your company pension plan or group RRSP, the less you will need to save to reach your goal. In an even broader sense, it is important to grow your money by taking advantage of the power of compound interest.
Make it real.
To really bring this message home to employees, I invite plan sponsors to consider creating a video message with whiteboard animation to emphasize different investment scenarios based on an employee starting to contribute to his group RRSP at age 25 versus a colleague who starts saving at age 35. Make the message fun, dynamic, and engaging.
Remember to share that the automatic nature of regular payments arranged by the employer takes away the worry of not being disciplined about saving. When a pre-determined amount is taken from the employee's pay, there is nothing to think about or action to take. It is the pay yourself first principle live and in action.
Remember to keep messages simple and hopeful. Finances and saving are topics that many wish to avoid because of their own personal stress and anxiety. Helping them get comfortable with contributing may take time, but it is worth the effort for all involved. Employees who feel secure with their approach to saving and their employer's support will be more productive and focused. Everyone wins.
Motivating employees to contribute to their company plan is supported by the expertise and support of a qualified advisor. There are many strategies and tactics to deploy. Contact us to explore the strategy that may be right for your organization. We're here to help so that you can focus on what you do best.
November is financial literacy month in Canada: tips for engaging employees in the importance of financial literacy
November is financial literacy month in Canada. While there are many tips and resources available for Canadians to learn ways to enhance their awareness of this important topic, there often appears to be a roadblock when it comes to interest and receptivity. What is it that stops employees from paying closer attention to their finances, their spending habits, and their focus on retirement savings?
It is highly unlikely that the majority of us will become rich through lottery winnings, nor will we live forever, yet there is a struggle to bring our attention to topics related to finances. If we did turn more of our attention to our saving and spending habits, the chances of reducing stress, anxiety, and frustration would be significant. As I've written about in previous blog posts, one of the main causes of stress is as a result of financial worries. People simply spend more than they make. When this happens, they are left feeling that there is no way they can stash away funds for retirement savings or dig themselves out of a giant debt hole.
What can employers do to help change this seemingly endless paradox? Employers are competing with cool and fun social networking sites, along with Netflix and speciality channel shows that often win out as an attention grabber for people who would rather be entertained then lost in a sea of financial forms that trigger more feelings of anxiety and upset.
A report recently produced by the International Foundation of Employee Benefit Plans (IFEBP) found that more than two-thirds of companies in North America offer financial education to employees. The report indicated that the rewards of having these resources in place may take years, but the payoff is worth it because employees are more focused on the job and less stressed since they aren't distracted by their financial woes. Employers who provide employees with just-in-time information and find ways to make learning about financial literacy fun and interesting have a much higher rate of success.
On the positive side of the equation, there are many handy, fun, and free tools to help people gain positive momentum when it comes to budgeting, saving, and planning for their financial freedom.
Here are three online games that fall into this category of fun, free, and entertaining.
Practical Money Tips Canada has financial soccer that simulates the 2014 FIFA World Cup Brazilian-branded version of Visa's multiple-choice question game. You're having so much fun that you don't even realize how much you're developing your financial management skills. Another similar game involves NFL Football. This game also has an iPad and an iPhone application.
Practical Money Tips Canada also offers a number of free calculators including saving for a goal, budget, career and retirement, credit and debt, to name a few.
Although originally designed for high school students, the vampire game "bite club" might work well for employees who recently graduated for college or university. It highlights the importance of long-term savings over a 45 year span in a 15-round game. The three learning objectives are: save for retirement, pay down debt, and manage current consumption.
Aside from games, there is a new Cash Smartphone to help consumers track all of their spending. As technology continues to innovate, more products and services will come to market in ways that help people make better choices about their financial situation. This concept bodes well for employers as many of these ideas will be offered at low or no cost via the internet.
Perseverance is the key word when it comes to improving employer statistics related to their employees' financial literacy savy. While there is no quick or immediate solution, there are ways to see tangible results. Contact us. We're here to help so that you can focus on what you do best.
Dave Dickinson, B.Comm, CFP, CLU, CHFC
Experienced Benefits Specialist ready to optimize your group benefits and pension plans.