Personal Finance: Cure the Worry Bug With a Dose of Education

Employees of Rackspace, a San Antonio-based cloud-hosting provider, were constantly seeking financial advice from Philip White, who directs benefits at the company. White, who has a background in the financial services industry, recognized a need, conducted a financial wellness assessment in January 2011, and implemented Rackwealth, a financial health and wellness program for employees who are called “Rackers.”

“Rackers were looking for personal financial education and guidance, even though I think they are doing better overall than most employees in the U.S.,” says White, who oversees benefits for 4,000 employees worldwide.

Financial stress and uncertainty are serious workplace issues, according to MetLife Inc.’s 9th Annual Study of Employee Benefits Trends. Fifty-eight percent of employers surveyed said that financial “illness” plays a role in employee absenteeism, and 78 percent said concerns over financial problems could have a negative effect on productivity. The study also found that effective financial education lowers stress, reduces absenteeism and increases productivity among the workforce.

And, according to a 2011 Bank of America Merrill Lynch Workplace Benefits Report, 59 percent of employers surveyed feel an increased sense of responsibility toward their employees’ financial well-being, and 53 percent feel that responsibility includes providing both financial benefit plans and access to financial education and advice. The report found that since the recession, nearly half (47 percent) of employers have seen an increase in the frequency with which prospective employees inquire about the financial benefit plans offered by their companies.

“More and more of my clients are asking for financial education for their employees,” says Nicholas Olesen, a private wealth manager with the Philadelphia Group in King of Prussia, Pennsylvania. “We’ve done seminars on home buying, budgeting and a variety of other topics, but the sad fact is that less than a quarter of employees take advantage of these programs when everyone should.”

He may be right. Another study by El Segundo, California-based Financial Finesse, a provider of financial education and wellness programs, found the overall state of U.S. employees’ retirement preparedness to be low, despite a positive trend in employees improving their finances and putting heavier emphasis on retirement planning.

“Our findings are especially disconcerting in light of decreasing government and employer-subsidized retirement benefits,” says Liz Davidson, Financial Finesse’s CEO. “There’s a new normal, and employees will not be able to meet their retirement goals unless they make significant improvements to their saving and planning behavior.”

In addition to managing myriad benefit options at work, employees face numerous other financial challenges including lower market returns and interest rates on investments, lower home equity, higher health care costs, and longer life spans, Davidson says.

To assist employees, 61 percent of employers surveyed in the Bank of America Merrill Lynch report provide education on preparing for retirement, while only 17 percent addressed day-to-day budgeting and spending.

Employers need to address the whole financial picture, Davidson says, because a workforce that can’t afford to retire can impact morale, performance and productivity. Older workers are more expensive to pay, more costly to insure, and may negatively affect the employer’s ability to attract and retain new talent.

“The truth is that if an employee isn’t saving enough for retirement, he or she may not be managing their money well in the first place,” Davidson says. “I see a lot of folks in the 35- to 44-year-old age group who are trying to save for their kids’ college or helping their elderly parents, but they need to remember that there are no scholarships for retirement. It is more appropriate to take care of your retirement first if you have to prioritize.”

Davidson advises employers to work with a financial education provider on a customized program that addresses strategic goals and is designed for their organization’s culture.

“Build on programs that have worked before. If online training and webcasts makes your employees happy, then offer those, but if they do better with face-to-face advice, then that’s money well-spent because you want to see results,” she says.

To date, Rackspace has offered several education modules through Financial Finesse, has brought radio host Dave Ramsey’s Financial Peace University program to its campus, and has provided one-on-one counseling opportunities.

“Right now, we’re focusing on personal financial education and guidance, and recently did a home-buying and mortgage seminar; however, we’ll continue to build this program out to cover funding college educations, making good benefit choices, and integrating 401(k) plan savings with other opportunities, such as the stock-option plan,” White says.

Rackspace’s Rackwealth program is barely a year old, but White says he’s already seeing encouraging results.

“Some of our employees have paid off their debt and are now saving for retirement,” he says.

Lisa Beyer is a Workforce Management contributing editor. To comment email editors@workforce.com.

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