Workplace Financial Wellness

Six second take: Younger generations in the workforce increasingly expect financial wellness programs to be provided through their employer.

A change from the distant past is helping foster a new change today. The introduction of the 401(k) and its associated shift from employer responsibility to employee responsibility altered the financial landscape a few decades ago. Now employees are leading the charge, expecting and in some cases demanding financial wellness in the workplace. The two are related: Across time, the shift of the burden to employees has helped fuel the necessity for increasing financial capabilities in an increasingly demanding financial world.

It was a different world back then. Many people are aware of the shift in responsibility associated with the change from defined benefit plans to defined contribution plans. By the early 1990s, the percentage of the U.S. private sector workforce covered by a defined benefit plan had dropped to 35 percent; it’s now down to around 16 percent.

Life expectancy in 1960 in the United States was just under 70 years; today it stands at just under 80 years. People live longer now than they did then. In 1960, the average person had a pretty short retirement to fund. Today that’s a much larger need, and it’s now primarily the employee’s responsibility. Not even to start on the impact of early retirement on the need.

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Then there’s the healthcare issue. People are certainly living longer, and healthcare needs increase as people get older. The healthcare burden of retirees has increased dramatically following the shift of responsibility, coupled with increasing longevity.


The third major factor in the seismic shift is in the complexity of the financial realm. Investment choices were fairly limited, and fairly straightforward, 60, or 50, or even 40 years ago. But that too has changed. There are investment options that couldn’t have been imagined back then, before the internet and the technology boom. We have vast amounts more information today. The question is how are employees supposed to make sense of all this?

Enter financial literacy, and enter financial wellness.

Financial Wellness and Financial Literacy

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Financial literacy has slowly become a mainstream concept. About half of U.S. states mandate some form of financial literacy education before students graduate high school. Though financial skills are positively associated with financial achievement, there is so far scant evidence of efficacy for these state programs. In some cases, the programs may be lost in getting merged into other coursework; in some cases the mandates simply aren’t being followed. Schools lack the resources, and in many cases the expertise, to properly implement financial literacy education. They are held responsible for many things. Financial literacy education is not their squeaky wheel.


Financial wellness is an outgrowth of financial literacy. It’s a broader, more inclusive, form of financial literacy, incorporating people’s relationships with money and the management of their financial stresses and other symptoms of financial non-wellness. It’s more of a financial lifestyle than just specific financial skills. It includes all of the aspects of financial literacy, but puts them into the specific context of the person’s life and situation.

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The shift has been driven by increasing financial stress, and its impact on employee performance. Younger workers are more likely to be financially stressed, and they are less likely to be able to leave that problem off the job. The younger generations in the workforce increasingly expect financial wellness programs to be provided through their employer. More millennials expected this than did boomers; with Gen Z, it is generally expected that the employer should be the source of these programs.

The Wellness Solution

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Employee expectations may not drive the shift to workplace financial wellness, but results likely will. Employers are competing for employees at all levels. Financial wellness programs have been associated with a variety of positive outcomes, including lower stress levels, improved employee satisfaction, and decreased turnover. Not every employer adopted the 401(k) when it was new, but eventually they had to do something. We may be in a similar situation now with financial wellness. Companies that lead stand to garner the greatest benefit, but financial wellness will be commonplace in the future.

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Broadly speaking, the Global Financial Literacy Excellence Center’s (GFLEC) holistic approach to workplace financial wellness provides a sound roadmap for program design. The GFLEC’s approach is four pronged, consisting of a financial checkup, using an integrated approach, personalization, and simplicity.

A financial checkup can accomplish several things. It can help show an employee if some of their stress is related to financial matters. It can serve as a guide for where to focus developmental activities, highlighting both strengths and weaknesses. The checkup can be comprehensive, as a standalone, or segmented (accomplished using a handful of calculators and questionnaires).

The checkup may or may not be the first step. It can make sense to have an overall basic financial education program followed by a checkup. This may make it easier for employees to understand where they are weak and why, helping them feel empowered to address change.

Integration has been sorely lacking in traditional workplace financial education efforts. Our financial lives don’t occur in silos — and our solutions shouldn’t either. Traditional education programs have been geared toward employer programs, and focused on retirement accumulation and perhaps several other isolated ideas, such as tax management or education accumulation. A comprehensive and integrated approach will have broader and more lasting effects.

Personalization has also been lacking from prior efforts. Educating someone about their 401(k) options is great, but it may be meaningless to individuals having cash-flow problems or unable to act due to stress. Effectiveness is directly related to how well a program fits with an employee’s personal situation. For example, some employees need help working through the financial aspects of a divorce, yet others do not.

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Simplicity is also a key. Financial service providers are not noted for their use of clear and concise language. Employees need to be met where they are, and that necessitates no assumptions that they should be coming in with an understanding of financial terminology or investment concepts. Simple programs are more effective. Even advanced programs benefit from clear and simple language. People won’t act if they don’t think they understand.

The Bottom Line

Workplace financial wellness has the potential to be as disruptive of an influence as the 401(k) has been. Younger employees in particular are experiencing high levels of financial stress and have an expectation of receiving financial wellness programs through their employer.

It’s impressive that we now have over 400,000 401(k) millionaires in the United States. Add in IRA millionaires and we have over three-quarters of a million retirement plan millionaires. That’s great, but it is not enough. The young workers of today will need to be 401(k) — or something else — millionaires if they are going to have a shot at a comfortable retirement.

They don’t know how to make that happen. They expect their employers to provide the guidance, and provide it in a way that they can consume it and make it work for them in their own lives.

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This is the next financial frontier, and it’s on our doorstep.