Exactly fifty years ago, in 1970, the average American was saving over 13% of their monthly income (U.S. Bureau of Labor Statistics). Couple that with generous pensions that paid retirees for the remainder of their lives, a popular perk for U.S. workers in the second half of the 20th century, and you’ll see a very different retirement picture than what most American face in 2020.
Currently, the average savings rate is somewhere between 6 and 8%, roughly half of the savings rate just a few decades ago. In addition, once common retirement plans such as pensions have been set aside for more cost-effective employer-sponsored retirement plans such as 401(k) plans, which require employees to take on more of the weight of preparing for their own retirement. If that wasn’t enough, the average life span has increased to over ten years, compared to the lifespan in the 1970s, meaning retirement dollars are having to stretch even further.
According to a 2019 TD Ameritrade report, 66% of millennial workers don’t feel on track when it comes to saving for retirement. When you look at current debt levels and savings rates of these younger workers, it isn’t hard to see why. The average full-time employee between the ages of 25 and 34 has about $33,000 in student loan debt, and nearly $7,000 in high-interest credit card debt. About half of those workers report living paycheck to paycheck. For people in this situation, the prospect of putting money in an account that they won’t be able to touch for 30 to 40 years seems unrealistic.
Employers are starting to take note of this growing crisis, but giving financial advice to employees can be a major liability issue, and finances is a difficult topic to discuss with anyone, especially your boss. With all that being said, there are a few things employers can do to help their employees save more.
Below are the top 5 strategies to help your workers save money in 2020:
5. Provide shopping discounts
By partnering with a third-party company that provides discounts at a range of stores, you can help employees save money on items they would have purchased anyway. One such provider is PerkSpot who provides users with discounts at hundreds of merchants, including Target, Best Buy, and Sprint. Especially for merchants that cover necessary purchases like food, toiletries, and cell phone plans, this can directly impact employees and their budgets, cutting costs at stores where they already shop.
4. Offer student loan assistance
As previously stated, employees between the ages of 24 and 39 have, on average, approximately $33,000 in student loan debt. The student loan issue is a growing crisis in America as tuition costs continue to soar at a rate far higher than wage growth. The result is many workers feeling squeezed by their monthly loan payments, leaving little leftover for savings or investments. By providing employees with tuition reimbursement programs and/or covering a portion of their loan payments, you can attract talented young employees, lower their debt obligations, which in turn encourages them to increase their savings rate.
3. Enhance 401(k) perks and learning resources
401(k) plans are the most common employer-sponsored retirement plans. However, a majority of workers are unable to contribute meaningful amounts for multiple reasons. One of the ways you can encourage an increase in savings for retirement is by raising the default contribution percentage for employees. Another way is to provide learning resources, typically given through a financial wellness provider, to explain the benefits of 401(k) plans, and educate employees about the usefulness and advantages of investing and retirement planning. Finally, by establishing a match, employers can incentivize employees to boost their contributions to take advantage of this “free money” offer, encouraging workers to build their nest egg.
2. Offer transit benefits for commuters
Housing and transportation are two controllable variables that greatly impact everyone’s budget, especially many young workers. While there is little you as an employer can do to influence where an employee chooses to live, you can incentivize your employees to use public transportation to commute to, as opposed to driving their own vehicle. For many companies located in areas without a well-serviced public transportation system, this isn’t a feasible option or incentive. However, for companies located in cities, paying for all or a portion of public transit passes can be the final incentive employees need to ditch the car and opt for the train.
For many car owners, monthly auto payments, insurance, maintenance, and parking can easily cost upwards from $600 to $800 per month. Comparing this to the cost of monthly public transportation passes, which range from $100 to $200 per month, choosing public over private transportation can save thousands of dollars each year.
1. Provide a financial wellness benefit
Finally, the most impactful and cost-effective way to help employees save more money is to add a financial wellness benefit to your perks package. While employers can’t directly give financial advice to workers, by offering access to licensed financial coaches and digital financial education resources, employers can empower their workers to better manage their money. These programs and tools help workers with everything from setting up effective budgets, minimizing student loan payments or enrolling in loan forgiveness programs (if eligible), improving credit scores, eliminating credit debt, learning to invest in the stock market, understanding how to maximize the benefit from their 401(k) or 403(b) plans, and many other unique financial circumstances employees are dealing with. The benefit of a financial wellness program over the other options is that they cover a broad range of topics and provide more individual attention to your employees, as opposed to providing a one-size-fits-all approach. As a result, employees see increased savings (in the thousands!), while also cutting down their high-interest debt.
See a list of the top financial wellness programs here.
There are many creative ways that you, an employer, can support and help your employees save money in 2020. To learn more and help your team reduce financial stress this year, schedule a demo today!