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  1. 1. <ul><li>Presented by </li></ul><ul><li>E. Thomas Garman, Aimee Prawitz, Jinhee Kim, Barbara O’Neill, Jamie Richter </li></ul><ul><li>Presented to Association for Financial Counseling and Planning Education November 18, 2009 </li></ul>“ Using a Return-on-Investment Model to Promote Financial Education in the Workplace” © Personal Finance Employee Education Foundation, 2009
  2. 2. <ul><li>Introduction </li></ul><ul><li>Judith N. Cohart, PFEEF President, January 1, 2010 </li></ul><ul><li>Using the PFW questions </li></ul><ul><li>PFEEF Resources and Website </li></ul><ul><li>PFEEF’s Return-on-Investment (ROI) efforts </li></ul><ul><li>ROI Logic and online calculator </li></ul><ul><li>Use PFFEF Expertise and Metrics to Project ROI for Employers </li></ul><ul><li>Pencil/Paper and Online Data Collection </li></ul><ul><li>Business Case for Workplace Financial Programs </li></ul><ul><li>Tips on Working with Employers </li></ul>Agenda for Today
  3. 3. <ul><li>AFCPE, President (1986, 1991) </li></ul><ul><li>AARP Foundation </li></ul><ul><li>National Coalition for Consumer Education </li></ul><ul><li>USA TODAY </li></ul><ul><li>U.S. Congress Legislative Assistant </li></ul><ul><li>District of Columbia Bar </li></ul>Judith N. Cohart, President PFEEF (January 1, 2010)
  4. 4. <ul><li>The PFW assesses financial health </li></ul><ul><li>The 8-question self-report PFW questions subjectively measure a multi-dimensional construct of financial distress/financial well-being by assessing some combination of the variables of financial well-being, financial distress, financial strain, and financial satisfaction </li></ul><ul><li>The PFW measures the single construct of financial distress/financial well-being </li></ul>Using the Personal Financial Wellness (PFW Questions
  5. 5. PFW Validity and Reliability <ul><li>Validity and reliability are enhanced by administration to multiple nationally representative samples of adults as well as multiple samples of financially distressed consumers; review of research; surveys of experts; attention to clarity, readability, appearance, and question sequencing </li></ul><ul><li>A reliability statistic is one indicator of the effectiveness of an instrument, and the Cronbach Alpha reliability statistic for the PFW is a very high 0.956 </li></ul>
  6. 6. PFW © (Q 1-4) (No Scaling or Anchor Terms Shown on This Slide) 1. What do you feel is the level of your financial stress today? 2. How satisfied are you with your present financial situation? 3. How do you feel about your current financial condition? 4. How often do you worry about being able to meet normal monthly living expenses?
  7. 7. PFW © (Q 5-8) (No Scaling or Anchor Terms Shown on This Slide) 5. How confident are you that you could find the money to pay for a financial emergency that costs about $1,000? 6. How often does this happen to you? You want to go out to eat, go to a movie or do something else and don’t go because you can’t afford to? 7. How frequently do you find yourself just getting by financially and living paycheck to paycheck? 8. How stressed do you feel about your personal finances in general?
  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 Personal Finance Employee Education Foundation and InCharge Education Foundation, 2004-2009 All rights reserved. (PFW Mean=5.7; SD=2.4) (1-4: 30%) High distress (5-6: 28%) (7-10: 42%) Low distress National Norms on PFW © 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. How to Use the PFW <ul><ul><li>Benchmark employee financial well-being (in 3 to 4 minutes) </li></ul></ul><ul><ul><li>Prove a financial program works </li></ul></ul><ul><ul><li>Project the employer’s return on investment (ROI) for providing employees easy access to quality financial programs </li></ul></ul><ul><ul><li>Prove the employer’s return on investment (ROI) </li></ul></ul>
  10. 10. PFW 150+ Users <ul><ul><li>Financial Organizations (77) </li></ul></ul><ul><ul><li>Universities (39) </li></ul></ul><ul><ul><li>Companies (26) </li></ul></ul><ul><ul><li>Military (5) </li></ul></ul><ul><ul><li>Government Agencies (1) </li></ul></ul><ul><ul><li>Medical (1) </li></ul></ul>
  11. 11. Using the PFFW <ul><li>Use of the IFDFW is free with written permission . Take 3 minutes to fill out and submit “Permission Form” on the website of the </li></ul><ul><li>Personal Finance </li></ul><ul><li>Employee Education Foundation </li></ul><ul><li> </li></ul>
  12. 12. <ul><li>Provides employers no-cost-to-use tools and expertise to detail the bottom-line benefits of quality financial programs </li></ul><ul><li>Promotes “PFEEF’s Best Providers ” whose quality workplace financial programs genuinely improve employees’ personal financial behaviors and increase employer profits </li></ul><ul><li>Encourages other providers to bring their programs up to proper standards </li></ul>PFEEF’s Resources and Website PFEEF is a 501(c)3 nonprofit charitable foundation
  13. 13. PFEEF Resources and Website <ul><li>PFW Questions </li></ul><ul><li>Research </li></ul><ul><li>Two videos </li></ul><ul><li>PowerPoint presentation </li></ul><ul><li>Employer’s ROI PP presentation </li></ul><ul><li>Marketing messages to employers </li></ul><ul><li>Ezine newsletter </li></ul>
  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: PFEEF Research Proves ALL These Factors are Correlated in the Ways Expected
  15. 15. 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
  16. 16. “ 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
  17. 17. Quality Workplace Financial Programs Rescue Employees and Employers by Quality Financial Programs Result in Improved Employee Personal Finances and Employer’s Bottom Line 1. Decreasing employee personal financial distress 2. Increasing employee personal financial wellness
  18. 19. PFEEF’s Approach to Projecting Return on Investment <ul><li>Benchmark employee financial health (employees complete PFW) </li></ul><ul><li>Determine key job outcomes of financial program (PFEEF and employer together) </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 ROI </li></ul>
  19. 20. PFEEF Projects 1-Year Changes in 10 Variables <ul><li>Less work-time wasted on personal finances </li></ul><ul><li>Less absenteeism </li></ul><ul><li>Reduced turnover </li></ul><ul><li>Improvements in job performance </li></ul><ul><li>Lower health care costs </li></ul><ul><li>Health care premium savings </li></ul><ul><li>Employer’s FICA savings - health care spending plan </li></ul><ul><li>Employer’s FICA savings - dependent care spending plan </li></ul><ul><li>Fewer workers’ compensation claims </li></ul><ul><li>Fewer garnishments </li></ul>
  20. 21. PFEEF Could Project Additional Variables as Part of Employer’s ROI <ul><ul><li>Additional factors that could be included in the PFEEF 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 401(k) 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 401(k) 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 401(k) plan fiduciary liability </li></ul></ul></ul></ul></ul>
  21. 22. PFEEF Assumptions Behind Employer Costs and Projected Improvements <ul><li>Employer cost assumptions are based on industry data and employer’s HR professionals </li></ul><ul><li>Projected improvements in personal financial behaviors are </li></ul><ul><ul><li>based on research </li></ul></ul><ul><ul><li>reasonable and conservative </li></ul></ul><ul><ul><li>for one year following participation in a quality financial program </li></ul></ul>
  22. 23. PFEEF Projected Benefit of Improved Job Outcomes for ABC Company (5,000 employees) <ul><li>Program impacts 30% of employees (1,500) with varying effectiveness and improvement in job outcomes: </li></ul>Work-time wasted on personal finances Absenteeism Turnover Job performance Health care costs Health care premium savings Health care spending plan Dependent care spending plan Workers’ compensation claims Garnishments Total benefit of improved job outcomes $ 412,335 115,505 720,000 1,253,000 148,500 10,000 68,850 91,800 75,000 33,750 $ 2,928,735
  23. 24. PFEEF Projected ROI Ratio of 3.04:1 for ABC Company (5,000 employees) <ul><li>Benefit of improv ed job outcomes = $2,928,735 </li></ul><ul><li>Cost of financial education program = $725,000 </li></ul><ul><ul><li>($145/employee) </li></ul></ul><ul><li>Benefits – Cost </li></ul><ul><li>Cost x 100 = ROI </li></ul><ul><li>$2,928,735 - $725,000 </li></ul><ul><li>$725,000 x 100 = 304% </li></ul><ul><li>Translation: T here will be $3.04 return on investment (ROI) in net benefits for every dollar invested in the financial program </li></ul>
  24. 25. How to Use PFEEF Expertise and Metrics to Project ROI <ul><li>Collect data using paper and pencil, and send to PFEEF </li></ul><ul><li>Collected data using PFEEF’s online system </li></ul><ul><li>Or use both </li></ul>
  25. 26. Five Ways to Use PFEEF Metrics and Expertise <ul><li>Utilize the online PFEEF ROI Calculator so employers can get an ROI estimate based on good generic assumptions and calculations and obtain a report of those findings </li></ul><ul><li>Help an employer collect data and analyze it yourself </li></ul><ul><li>Ask PFEEF to help benchmark the financial wellness of an employer's employees, and data collection takes about 7 minutes (includes concise report  </li></ul><ul><li>Ask PFEEF to work with an employer’s PFW scores and cost data  to prepare a comprehensive employer-specific return-on-investment report  </li></ul><ul><li>One year later PFEEF can prove the genuine ROI using employer data </li></ul>
  26. 27. The Business Case for Quality Workplace Financial Programs <ul><li>Legal – “insurance” against litigation (ERISA and SOX liability and CFO nightmare) </li></ul><ul><li>Bottom-line benefits – better productivity and retention </li></ul><ul><li>Human resources – attract, retain, reward, motivate the right employees </li></ul><ul><li>Benefits – facilitates benefit plan changes and behavioral changes </li></ul><ul><li>Culture – links the program to the values the company wants to instill in employees </li></ul><ul><li>Social/Moral – it is right thing to do as stewards of employee well-being </li></ul>*Delivering Financial Literacy Instruction to Adults , Garman & Gappinger, 2008, taken from Ernst & Young’s Bill Arnone’s comments on pages 31-35 (Heartland Institute of Financial Education [ 303-597-0197] )
  27. 28. Tips For Working With Employer’s Financial Education Programs Barbara O’Neill, Ph.D., CFP ® Extension Specialist in Financial Resource Management Rutgers Cooperative Extension
  28. 29. Working With Employers <ul><li>Framing improved practices of program participants in economic terms will help improve accountability to employers </li></ul><ul><li>Can have high dollar impacts even with conservative assumptions for program participation, number of evaluation responses, and number of respondents who report changed behavior </li></ul><ul><li>The key is to have common impact indicators and to aggregate data. </li></ul>
  29. 30. Working With Employers: Calculating Economic Impacts of Programs
  30. 31. What to Do in Employee Presentations <ul><li>Find out demographics of the audience </li></ul><ul><li>Request employee benefit documents </li></ul><ul><ul><li>Summary Plan Description for pension </li></ul></ul><ul><ul><li>Employee benefits manual </li></ul></ul><ul><li>Provide written handouts </li></ul><ul><li>Come early and meet the audience </li></ul><ul><li>Always use examples with modest incomes </li></ul><ul><li>Comment favorably of quality employee benefit plans </li></ul><ul><li>Tell success stories and describe role models </li></ul>
  31. 32. What NOT to Do in Employee Presentations <ul><li>Use acronyms without explaining them </li></ul><ul><li>Use statistics instead of dollar amounts </li></ul><ul><li>Use text-heavy PowerPoint slides </li></ul><ul><li>Straight lecture instead of facilitated discussion </li></ul><ul><li>Miss opportunities to prompt immediate action (e.g., signing up for 401(K) plan) </li></ul><ul><li>Miss opportunities to conduct follow-up evaluations, including ROI analysis </li></ul>
  32. 33. <ul><li>It is in the employer’s best interest— more profits —to provide employees easy access to quality financial programs </li></ul>PFEEF Conclusion about Employee Financial Literacy and Employer Profits “ It also is the right thing to do as stewards of employee well-being!”
  33. 34. Thanks!
  34. 35. Information <ul><li>Dr. E. Thomas Garman, President, Personal Finance Employee Education Foundation, Professor Emeritus and Fellow, Virginia Tech University </li></ul><ul><ul><li>9402 SE 174 th Loop, Summerfield, FL 34491 USA </li></ul></ul><ul><ul><li>Tele/Fax: 352-347-1345; E-mail: info@pfeef or </li></ul></ul><ul><ul><li>Web: </li></ul></ul><ul><li>For free permission to use the PFW scale , fill out online form </li></ul><ul><li>To examine the PFW scale and research articles about its use, see </li></ul><ul><li>Book available: Delivering Financial Literacy Instruction to Adults (2008), Garman & Gappinger, Heartland Institute of Financial Education (303-597-0197) </li></ul>