Employees are becoming increasingly engaged and more proactive in their financial planning, according to a new study.
The study, by the employee financial education provider Financial Finesse, found that employers are responding to the greater interest in financial planning by providing employees with more financial education and financial wellness programs.
As employees take a closer look at their finances, they are developing a greater sense of urgency around improving their finances, with 23% reporting high or overwhelming financial stress in 2013 compared to 18% in 2012. However, they were more likely in 2013 to indicate that their stress is a result of areas they have control over and less likely to cite the economy or lack of trust in financial advisors as a reason for their stress.
Employees made notable improvements in proactive areas of financial planning, with usage by employees regularly tracking their financial wellness increasing by 73%.
The employees who were surveyed are increasingly recognizing their financial shortcomings and developing a greater sense of urgency around improving their finances. Forty-two percent indicated in 2013 they are concerned they will not reach future financial goals, compared to 35% in 2012.
At the same time, a lower percentage of employees report being stressed about the economy or distrustful of financial advisors. This demonstrates employees are focusing more on taking responsibility for their own finances rather than worrying about external factors they cannot control.
Forty-three percent cited the stock market and U.S. economy as a source of stress, while 22% are unsure who to trust with their finances, down from 47% and 24% in 2012, respectively.
With the increased urgency, employees overall are becoming more proactive about their financial planning and making improvements in areas that support their long-term financial security. A greater percentage of employees are taking steps to improve their financial situations on a regular basis. Forty-seven percent said they have taken a risk tolerance assessment compared to 44% in 2012; 36% say they rebalance their investment accounts versus 31% in 2012; and 47% are maximizing all available federal tax credits and deductions, up from 44% in 2012.
Financial Finesses Think Tank director Greg Ward said that although the firm has seen generally consistent improvement in employees financial behaviors over the past few years, 2013 marked a critical turning point in employees level of commitment to improving their finances.
Financial Finesse CEO Liz Davidson pointed out that employees arent the only ones experiencing what she calls a financial awakening.
Society as a whole is beginning to put more emphasis on financial security and financial education, said Davidson in a statement. Were seeing more and more providers of these types of services come into the marketplace, and the number of employers implementing workplace financial wellness programs is rising significantly.
According to a 2013 AON/Hewitt study, 80% of employers said they would likely focus on the financial well-being of their employees. A similar study also conducted by AON/Hewitt just a year earlier found that only 32% of employers planned to make this a priority.
Davidson noted that inquiries from employers considering offering financial wellness programs to their employees increased 275%from 2012 to 2013. She attributed the jump to an increase in employers that recognize the benefits of employee financial wellness programs which have been proven to reduce financial stress and improve health, productivity, and pay and benefits satisfaction. She also said there is a major trend towards employers recognizing that the key to helping employees retire comfortably starts with helping them to better manage their money so they can save more for retirement.
Both Davidson and Ward believe that this is the beginning of a new era. Ward noted that the latest research is consistently showing that employees are adapting en masse to a new free agent economy where they must take responsibility for their own financial security rather than relying on financial support from their employers or the government.
Michael Cohn is editor-in-chief of accountingtoday.com