Did you know that 9 million Canadians struggle with low financial literacy? What is financial literacy anyway?
According to the Financial Consumer Agency of Canada, financial literacy is having the knowledge, skills and confidence to make responsible financial decisions. Based on the spending and savings habits of Canadians, it is apparent that a month focused on financial literacy is warranted. Good thing November is dedicated to Financial Literacy and supporting Canadians enhance their financial know how.
Statistics and survey results tell a story that reflects concern across the board when it comes to how well Canadians do with savings goals and debt management. ABC Life Literacy reported that 35 percent of Canadians don't have any savings or investments; and the average savings in an RRSP is only $55,000.
Although the statistics are discouraging, there are practical ways employers can help encourage employees to feel that adopting better savings habits and debt management skills are within their grasp. Understanding pension plans doesn't have to be a scary undertaking. By adopting some common sense best practices, employers can provide resources to assist employees easily navigate what may appear to be the choppy seas of debt management.
Here are some tips to help employees steer for the calm shores created by realistic savings goals:
Hold Education Sessions
Make it Easy and Fun
Finding ways to engage employees and start them down the path of developing good savings habits often is the most difficult part of the process. Once employees understand why they should get goals and targets for their short and long term plans, their future as well as the financial well-being of our nation will benefit.
For more information about savings tools or planning sessions to meet your specific needs, please contact us. We're here to help so you can focus on what you do best.
In Part 1 of Tips to Improve Retirement Readiness for employees, I touched on using quarterly Old Age Security (OAS) announcements as a prompt to think about the importance of saving for retirement.
While this is one simple tactic, there are others that when implemented as part of a plan sponsor's retirement plan communication strategy, the level of awareness, engagement and participation of plan members will increase in tangible ways.
Here are four best practice tips for improving retirement savings outcomes:
Understanding how each generation in the workplace feels about financial planning and saving for retirement, can lead to better tactics for communicating retirement strategies. Encouraging employees with the call to action that it is never to late to start saving for retirement has become a prominent message. Introducing practical retirement planning best practices will ensure increased participation rates and better retirement outcomes.
For help with introducing these tactics and others, please contact us. We're here to help so that you can focus on what you do best.
As employers continue to look for ways to engage their employees, it seems to be a never ending quest to ensure their plan members have the information needed to make the best possible decisions. Yet all too often, there is an assumption that employees will read the information they are provided and then make sound, rational decisions.
Based on years of experience, client feedback and behavioural economics research, we've learned that employees who make suboptimal decisions negatively affect the quality of their health as well as their financial future. We also know that their decisions in life affect their group benefits plan.
There are many articles on the web and in benefits and pension publications referencing statistics that employees aren't saving enough for retirement. One such example related to data from the 2011 Retirement Confidence Survey, which finds that almost one-third of employees have no savings set aside for retirement, and over 50 percent have saved less than $25,000. What is to be done? What level of accountability is placed on the employer when plan members make poor decisions about their retirement savings?
According to a DCIIA 2011 Plan Sponsor Survey, no matter how much an employer endorses the fact that members should be saving at a rate of 10 percent of salary or higher, most employees fall drastically short of this goal and find themselves saving at a rate of 4 percent of their salary or lower. The result of their decisions finds employees working longer and delaying retirement out of need rather than want. Their choices affect the rest of the employees who may be waiting for a promotion into a job that has been bottlenecked by someone who wishes to retire, but can't afford to stop working. The result has long tail effects on employee engagement and workplace culture.
Similar scenarios and outcomes exist for employee decisions related to health benefits. In a world where we know the negative results caused by adopting poor eating habits, we see the number of people with Type 2 Diabetes continue to rise exponentially. In other instances, employees are inundated with information from their employer about the importance of preventive health care, yet many employees fail to get regular check-ups and free screening tests offered right at their place of work.
With these observations and statistics in mind, it is worth considering the fact that employees - even though well armed with important and helpful information - don't always use rational judgement when making decisions about health and finances. For employers looking to revamp their communication plans, it is helpful to understand the behavioural tendencies of their workforce in terms of the outcomes they've experienced to date.
Here are a few tips to consider when designing communications for employees:
Benefits communications that dive down a path highlighting the negative outcome of employee choices generate emotional responses that deter the reader from accepting the recommendations. In benefits communications, negative framing results in employees who put up walls to the message. They become defensive and their negative behavioural tendencies continue.
With so much being communicated to employees, it helps to ensure your messages are positively framed, easy to read and with key steps for healthy outcomes clearly and simply stated. Using communication vehicles that employees readily access is also key. Depending on the demographics, and other important variables, incorporating social media can be a helpful way to help employees make well informed decisions that positively affect them and the health of their benefits plan.
For more information about this topic, please contact us. We're here to help so that you can focus on what you do best.
Let's face it, since the fall of 2008, we've experienced quite the bumpy ride on the economic roller coaster. Frightening at times, it has been an eye opener if nothing else. Perhaps even a call to action for some plan sponsors who continue grappling with the challenge of engaging plan members into better benefits consumers.
To solve for the seemingly ever present issue of finding ways to increase financial literacy and helping employees see the importance of becoming smart shoppers for health benefits hasn't proven easily doable.
There are ways to chip away at the problem. Like the age old saying 'you can't eat a elephant in one bite', there is no panacea or silver bullet to instantly transform plan members into savvy benefits consumers.
Here are a few tips to consider as you chip away at this issue:
Plan & Measure...First.
Educating plan members involves changing behaviour patterns. This involves understanding what they know, or rather don't know, and then gaging the impact or differential at the conclusion of your awareness campaign. Otherwise it becomes increasingly difficult to measure success or the level of change.
Before you begin, have some specific outcomes in mind with tangible goals and deliverables. Then develop your programs and tactics accordingly. It will make the whole process a lot easier to measure and explain to key decision makers.
Target one area of focus
So as not to overwhelm those implementing a smart consumer campaign and for the plan members you hope to positively impact, make it easier for all by targeting one area of focus. Pick a topic that you're struggling with most and go for it. If prescription drug costs are skyrocketing out of control for your plan, pursue that issue and build your campaign to raise awareness of the key cost drivers and how plan members can help keep their benefits price tag affordable.
Tell a story
We all love stories. Describing a scenario that plan members can easily relate to is a great way to create memory 'stickiness'. Our brain is wired to remember stories; that is why many of us can easily retell a joke or share an urban myth. Use this method of communication to educate and inform. Soon plan member, Sally, will tell two coworkers, and it builds from there. The concept of storytelling has power in its simplicity for recall and retelling.
Try something different
While one way communication remains the most commonly used form of sharing messages with members, social media can be an effective and efficient way to integrate two way communication into an awareness campaign. How many plan members already use social networking sites for personal use? Increasingly, studies are showing that people want their benefits information via methods they readily use. This isn't to say that in-person or email tactics are going the way of the Dodo Bird, but the 'new media' species seems to be here to stay.
Blog and ask for comments or questions to learn what plan members don't like or don't understand about an issue. Tweet to link to a blog or article that speaks directly to your topic. Understand what networking sites employees most use in your work setting and leverage it for maximum reach and impact.
Change doesn't happen overnight. Be patient and stay with it. With your plan in place, and specific, tangible outcomes to measure, you will make an impact and increase awareness. It takes time, but the potential for cost savings, cost containment and the health of your plan members are worth the effort.
Got questions about how to transform plan members into smart benefits shoppers? Call or email me. We're here to help so 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.