<ul><li>Presented by </li></ul>“ Workplace Financial Programs Are Profitable When Done Right” © 3 Square Financial, 2009
<ul><li>Personal financial challenges and problems </li></ul><ul><li>Why employee financial illiteracy is an employer prob...
<ul><li>Participation in and deferral rates to retirement savings  plans are  inadequate </li></ul><ul><li>Most are  not s...
<ul><li>Credit Card Delinquencies  – 38% +90 days overdue, 85% have outstanding debt on cards  </li></ul><ul><li>Credit Ca...
<ul><li>Surveys </li></ul><ul><li>80%  - worried about their personal finances and think financial times will get worse </...
<ul><li>Credit card payments ($11K) $330-$430 month </li></ul><ul><li>Vehicle payments ($15K)  $400-$500 month </li></ul><...
<ul><li>5 million Canadian workers  </li></ul><ul><li>– 1 in 3 – </li></ul><ul><li>report they are seriously financially d...
Source: InCharge Education Foundation, National Norms on InCharge Financial Distress/Well-Being Scale ©  for General Adult...
30% Are Failing Financially!  (Scores of 1-4 on PFW)
<ul><li>Over 80 studies prove that employee personal finances and the employer’s bottom line go together </li></ul><ul><li...
<ul><li>“ Financially unwell employees do not  make the best decisions for themselves… or  their employers” </li></ul><ul>...
Employee Financial Illiteracy is an Employer Problem <ul><li>Financially Illiterate adults do not manage their personal fi...
Employers Often Recognize These Issues… But Do Nothing. “ You can lead a horse to water, but you can’t make it drink” Empl...
<ul><li>Personal Finances: </li></ul><ul><li>Financial well-being </li></ul><ul><li>Financial satisfaction </li></ul><ul><...
<ul><li>Employees with financial distress report poor health. f </li></ul><ul><li>Financially distressed employees have wo...
“ Employer cost for not providing basic financial education that changes behaviors and job outcomes is $750 to $2,000+ per...
Quality Workplace Financial Programs Rescue Employees  and  Employers by 1.  Decreasing  employee personal  financial dist...
<ul><li>Salary increases?  No </li></ul><ul><li>Bonuses?  No </li></ul><ul><li>Most retirement education workshops?  No </...
<ul><li>Employers who provide employees easy access to  quality  financial programs: </li></ul><ul><ul><li>Basic financial...
This is knowledge about •  Spending Plans •  Credit Management •  Savings “ AND The lack of financial literacy is  the maj...
Quality Programs Result in Financially Literate Employees  Who are Engaged with Money Issues Human resources professionals...
<ul><li>Employer  demands more  from current financial program providers </li></ul><ul><li>Employer insists  one provider ...
<ul><li>Lower financial distress </li></ul><ul><li>Increase financial well-being </li></ul><ul><li>Better health </li></ul...
“ Employers do not realize they can improve profits – and prove it– by helping employees improve personal financial behavi...
<ul><li>Return on Investment (ROI): </li></ul><ul><li>The Personal Finance Employee  Education Foundation expects  employe...
3 Square Financials’ Approach to Projecting Employer’s ROI <ul><li>Benchmark employee financial health  by asking workers ...
<ul><li>3 Square Financial and  your   HR professional estimate projected impacts   of financial program on job outcomes/o...
3 Square Financial Projects 1-Year Changes in 6 Variables <ul><ul><li>Less work-time spent on personal finances </li></ul>...
3 Square Financial Could Project Additional Variables as Part of Employer’s ROI <ul><ul><li>Additional factors that could ...
3 Square Financial Assumptions Behind Employer Costs and Projected Improvements <ul><li>Employer cost assumptions  are gro...
3 Square Financials’ Conservative Assumptions of Program Impacts <ul><li>Program  offered to all employees </li></ul><ul><...
<ul><li>Make us prove it  by measuring increases in PFW scores as well as the quality of savings </li></ul><ul><li>Give us...
<ul><li>It is in the employer’s best interest— more profits —to provide employees easy access to quality financial program...
<ul><ul><li>f  Bagwell & Kim, 2008; Drentea, 2000; Drentea & Lavrakas, 2000; Garman et al, 2004; Genco et al., 1999; Garma...
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Employees Are Out of Control and It\'s Costing You Money

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Employees Are Out of Control and It\'s Costing You Money

  1. 1. <ul><li>Presented by </li></ul>“ Workplace Financial Programs Are Profitable When Done Right” © 3 Square Financial, 2009
  2. 2. <ul><li>Personal financial challenges and problems </li></ul><ul><li>Why employee financial illiteracy is an employer problem </li></ul><ul><li>Employer costs of financially unhealthy employees </li></ul><ul><li>Results of quality workplace financial programs </li></ul><ul><li>How 3 Square Financial projects employer’s ROI </li></ul><ul><li>Recommendations and conclusions </li></ul>Agenda for Today
  3. 3. <ul><li>Participation in and deferral rates to retirement savings plans are inadequate </li></ul><ul><li>Most are not saving enough for retirement </li></ul><ul><li>Workplace education and advice programs have been underutilized </li></ul><ul><li>Millions of employees say they cannot afford to reach their financial goals, and 65% say debt is the reason </li></ul><ul><li>Employees do not know how to help themselves </li></ul><ul><li>Employers do not understand the value of providing their employees easy access to the best mix of quality financial programs </li></ul>Employee Personal Financial Challenges in Retirement Saving
  4. 4. <ul><li>Credit Card Delinquencies – 38% +90 days overdue, 85% have outstanding debt on cards </li></ul><ul><li>Credit Card Losses — Most pay only “minimum amount due” </li></ul><ul><li>Household Debt – 21% in crisis </li></ul><ul><ul><ul><li>Spending $1.16 for every $1 of discretionary income </li></ul></ul></ul><ul><ul><ul><li>58% of new debt to meet day-to-day living expenses </li></ul></ul></ul><ul><ul><ul><li>19% have missed one or more mortgage payments </li></ul></ul></ul><ul><ul><ul><li>Home prices declined 15% in last 2 years </li></ul></ul></ul><ul><ul><ul><li>10% would not be able to raise $500 in emergency </li></ul></ul></ul>Employee Personal Financial Problems
  5. 5. <ul><li>Surveys </li></ul><ul><li>80% - worried about their personal finances and think financial times will get worse </li></ul><ul><li>60% - trouble making ends meet </li></ul><ul><li>37% - no emergency fund </li></ul><ul><li>$392 – average savings balance </li></ul><ul><li>10% - delinquent in bills </li></ul><ul><li>15 million – calls from collectors </li></ul>Employee Personal Financial Problems
  6. 6. <ul><li>Credit card payments ($11K) $330-$430 month </li></ul><ul><li>Vehicle payments ($15K) $400-$500 month </li></ul><ul><li>College loan payments ($30K) $400-$600 month </li></ul><ul><li>Savings $33 month </li></ul><ul><li>Child-care ($5-$21K) $400-$1200 month </li></ul><ul><li>Property taxes $ </li></ul><ul><li>Homeowner’s insurance $ </li></ul>“ Don’t give employees a raise! Offer help with money management challenges” Employee Personal Financial Problems “60% live paycheck-to-paycheck and do not save enough for retirement”
  7. 7. <ul><li>5 million Canadian workers </li></ul><ul><li>– 1 in 3 – </li></ul><ul><li>report they are seriously financially distressed and dissatisfied with their personal finances </li></ul>Employee Personal Financial Problems – Millions of Financially Unhealthy Workers
  8. 8. Source: InCharge Education Foundation, National Norms on InCharge Financial Distress/Well-Being Scale © for General Adult Population. 1 Means “Overwhelming Financial Distress/Worst Financial Well-Being”; 10 Means “No Financial Distress/Excellent Financial Well-Being” © Copyright by InCharge Education Foundation and E. Thomas Garman, 2004-2009 All rights reserved. (Mean=5.7; SD=2.4) (1-4: 30%) High distress (5-6: 28%) (7-10: 42%) Low distress Employee Personal Financial Problems Reflected in Financial Wellness National Norms on PFW Scale © 1 2 3 4 5 6 7 8 9 1 0 5.4 6.9 8.2 9.2 14.5 14.2 13.8 12.2 11.4 4.2 0 . 0 2 . 0 4 . 0 6 . 0 8 . 0 1 0 . 0 1 2 . 0 1 4 . 0 1 6 . 0 Percentage
  9. 9. 30% Are Failing Financially! (Scores of 1-4 on PFW)
  10. 10. <ul><li>Over 80 studies prove that employee personal finances and the employer’s bottom line go together </li></ul><ul><li>Research says that: “Employees with money problems are like sharks swimming around the workplace taking bites out of the bottom line” </li></ul><ul><li>“ Every time someone on your work team brings his/her money worries to the job, workplace productivity drops” </li></ul>Employee Financial Illiteracy is an Employer Problem
  11. 11. <ul><li>“ Financially unwell employees do not make the best decisions for themselves… or their employers” </li></ul><ul><li>Research shows: </li></ul><ul><li>30-80% of ALL workers waste time at work on money issues </li></ul><ul><li>How much time? </li></ul><ul><li>12 – 20 hours per month </li></ul>Employee Financial Illiteracy is an Employer Problem
  12. 12. Employee Financial Illiteracy is an Employer Problem <ul><li>Financially Illiterate adults do not manage their personal finances very well… </li></ul><ul><li>And they do not save and invest enough for a financially successful retirement </li></ul><ul><li>THIS contributes to lower productivity as well as higher health care costs </li></ul>
  13. 13. Employers Often Recognize These Issues… But Do Nothing. “ You can lead a horse to water, but you can’t make it drink” Employee Financial Illiteracy is an Employer Problem
  14. 14. <ul><li>Personal Finances: </li></ul><ul><li>Financial well-being </li></ul><ul><li>Financial satisfaction </li></ul><ul><li>Financial distress </li></ul><ul><li>Financial stressor events </li></ul><ul><li>Financial behaviors </li></ul><ul><li>Credit card debt </li></ul><ul><li>Credit card delinquencies </li></ul><ul><li>Job Outcomes: </li></ul><ul><li>Work satisfaction </li></ul><ul><li>Pay satisfaction </li></ul><ul><li>Absenteeism </li></ul><ul><li>Presenteeism (cutting down on normal activities) </li></ul><ul><li>Personal financial matters interfering with work </li></ul><ul><li>Work time used to handle personal finances </li></ul><ul><li>Health </li></ul>Employer Costs: Research Proves ALL These Factors are Correlated in the Ways Expected
  15. 15. <ul><li>Employees with financial distress report poor health. f </li></ul><ul><li>Financially distressed employees have worse health than other workers. g </li></ul><ul><li>40 to 50% of financially distressed workers report that financial problems caused their health woes. h </li></ul><ul><li>1/3 of professional employees say are so sad or down they couldn’t perform job tasks due to financial distress. i </li></ul><ul><li>Positive changes in financial behaviors are related to improved health. j </li></ul>Employer Costs: Research Shows that Health and Personal Finances are Correlated
  16. 16. “ Employer cost for not providing basic financial education that changes behaviors and job outcomes is $750 to $2,000+ per employee!” Employer Costs: Annual Cost to Employer for Ignoring One Worker’s Financial Illiteracy
  17. 17. Quality Workplace Financial Programs Rescue Employees and Employers by 1. Decreasing employee personal financial distress 2. Increasing employee personal financial wellness
  18. 18. <ul><li>Salary increases? No </li></ul><ul><li>Bonuses? No </li></ul><ul><li>Most retirement education workshops? No </li></ul><ul><li>Marriage counseling? No </li></ul><ul><li>Employee Assistance Programs? No </li></ul>What does NOT reduce employee financial distress and increase financial wellness?
  19. 19. <ul><li>Employers who provide employees easy access to quality financial programs: </li></ul><ul><ul><li>Basic financial education </li></ul></ul><ul><ul><li>Credit counseling </li></ul></ul><ul><ul><li>Benefits information/education </li></ul></ul><ul><ul><li>Retirement education </li></ul></ul><ul><ul><li>Financial advice </li></ul></ul><ul><ul><li>Financial coaching that changes behaviors </li></ul></ul>“ Bring together the basic financial resources to truly help employees” What DOES reduce financial distress and increase financial wellness?
  20. 20. This is knowledge about • Spending Plans • Credit Management • Savings “ AND The lack of financial literacy is the major reason why employees do not save for retirement” Quality Programs Emphasize “Basic Financial Literacy”
  21. 21. Quality Programs Result in Financially Literate Employees Who are Engaged with Money Issues Human resources professionals can help make this happen <ul><li>Comparison shop </li></ul><ul><li>Achieve savings goals </li></ul><ul><li>Enjoy average to above average financial well-being </li></ul>
  22. 22. <ul><li>Employer demands more from current financial program providers </li></ul><ul><li>Employer insists one provider give leadership to deliver a coordinated quality program that emphasizes the basics of personal finance : </li></ul><ul><ul><li>Spending Plan </li></ul></ul><ul><ul><li>Credit Management </li></ul></ul><ul><ul><li>Savings </li></ul></ul><ul><li>Provider must use targeted communications to motivate employees to change </li></ul>Quality Workplace Financial Programs Reduce Employee Financial Illiteracy and Save Employer $750 - $2,000+ “ It’s not a matter of money spent on financial education - It’s a matter of demanding effectiveness!”
  23. 23. <ul><li>Lower financial distress </li></ul><ul><li>Increase financial well-being </li></ul><ul><li>Better health </li></ul><ul><li>Retirement preparation </li></ul><ul><li>Improved family relationships </li></ul><ul><li>Gains in job performance </li></ul>Quality Financial Program Result in Improved Employee Financial Wellness
  24. 24. “ Employers do not realize they can improve profits – and prove it– by helping employees improve personal financial behaviors” Quality Financial Programs Result in Improved Employer Profits
  25. 25. <ul><li>Return on Investment (ROI): </li></ul><ul><li>The Personal Finance Employee Education Foundation expects employers typically will receive a ROI of 3:1 (or more) annually for quality financial programs </li></ul><ul><li>Example: </li></ul><ul><ul><li>Cost: $500 invested in financial </li></ul></ul><ul><ul><li>programs by employer </li></ul></ul><ul><ul><li>Benefit: $1,500 </li></ul></ul>ROI = 3:1 Quality Financial Programs Result in a Positive ROI for Employers
  26. 26. 3 Square Financials’ Approach to Projecting Employer’s ROI <ul><li>Benchmark employee financial health by asking workers to respond to “Personal Financial Wellness (PFW)” scale questions </li></ul><ul><li>PFW is an 8-item online and/or pencil-and-paper questionnaire that in 3-4 minutes measures financial health </li></ul><ul><li>PFW is a valid, reliable , peer-reviewed, and published measure (over 25 years in development) with national norms </li></ul>
  27. 27. <ul><li>3 Square Financial and your HR professional estimate projected impacts of financial program on job outcomes/other employer variables </li></ul><ul><li>Assign values to each key job outcome </li></ul><ul><li>Calculate projected benefits of financial program </li></ul><ul><li>Identify program cost and calculate employer’s projected return on investment (ROI) </li></ul>3 Square Financials’ Approach to Projecting Employer’s ROI
  28. 28. 3 Square Financial Projects 1-Year Changes in 6 Variables <ul><ul><li>Less work-time spent on personal finances </li></ul></ul><ul><ul><li>Less absenteeism </li></ul></ul><ul><ul><li>Reduced turnover </li></ul></ul><ul><ul><li>Improvements in job performance </li></ul></ul><ul><ul><li>Fewer workers’ compensation claims </li></ul></ul><ul><ul><li>Fewer garnishments </li></ul></ul>
  29. 29. 3 Square Financial Could Project Additional Variables as Part of Employer’s ROI <ul><ul><li>Additional factors that could be included in the project ROI calculation that may contribute to increasing benefits over the costs are: </li></ul></ul><ul><ul><ul><ul><ul><li>fewer payroll advances </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>fewer loans from pension plans </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>fewer accidents </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>less workplace violence </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>less substance abuse </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>fewer thefts </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>increase in job engagement </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>improved morale </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>increased participation in pension plan </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>reduced human resource department costs </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>reduced fiduciary liability </li></ul></ul></ul></ul></ul>
  30. 30. 3 Square Financial Assumptions Behind Employer Costs and Projected Improvements <ul><li>Employer cost assumptions are grounded in data available from industry sources as well as from the employer’s HR professionals </li></ul><ul><li>Projected improvements in personal financial behaviors based on research </li></ul><ul><li>Projections for improved job outcomes are reasonable and conservative </li></ul><ul><li>Projected impacts are for one year following participation in quality financial program </li></ul>
  31. 31. 3 Square Financials’ Conservative Assumptions of Program Impacts <ul><li>Program offered to all employees </li></ul><ul><li>Program does not impact 70% of employees in meaningful and measurable ways or result in improvements in their personal financial behaviors and financial health </li></ul><ul><li>Program does impact 30% of employees with varying degrees of effectiveness resulting in a range of improved financial behaviors and job outcomes/other employer variables </li></ul>
  32. 32. <ul><li>Make us prove it by measuring increases in PFW scores as well as the quality of savings </li></ul><ul><li>Give us 12 months to produce success </li></ul><ul><li>All the time knowing that your ROI will be 3:1or higher </li></ul>Recommendations
  33. 33. <ul><li>It is in the employer’s best interest— more profits —to provide employees easy access to quality financial programs </li></ul>Conclusions about Employee Financial Literacy and Employer Profits “ It also is the right thing to do as stewards of employee well-being!”
  34. 34. <ul><ul><li>f Bagwell & Kim, 2008; Drentea, 2000; Drentea & Lavrakas, 2000; Garman et al, 2004; Genco et al., 1999; Garman et al., 2007;l Jacobson et al., 1996; Lyons & Yilmazer, 2005; Kim, Sorhaindo, & Garman, 2004; Prawitz et al., 2007; Shatwell et al, 2007. </li></ul></ul><ul><ul><li>g Kim, Sorhaindo, & Garman, 2003; Prawitz et al, 2007; O’Neill et al, 2005 (2 articles); Sorhaindo & Garman, 2002. </li></ul></ul><ul><ul><li>h Garman et al, 1999; Kim, Garman, & Sorhaindo, 2003 (AFCPE and ACCI); Kim, Sorhaindo, & Garman, 2004; O’Neill et al, 2006; Weisman, 2002. </li></ul></ul><ul><ul><li>i Unpublished data. </li></ul></ul><ul><ul><li>j Kim, Garman, & Sorhaindo, 2003 (AFCPE and ACCI); O’Neill et al, 2006; O’Neill et al, 2005 (2 articles). </li></ul></ul>Footnotes

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