Offering financial wellness programs could be a powerful tool for engagement and retention. This May the next batch of recent college grads will be starting their first full-time professional jobs. They’ll come equipped with degrees ranging from engineering and computer science to business and communications. They’re technically savvy, globally aware, and according to Pew, “they are on track to be the most well-educated generation yet.”
They also have the lowest financial literacy of any generation in the workforce today. If your organization wants to help retain and develop this cohort of new hires, you might consider including some financial wellness in your onboarding process or offering financial literacy as an element of your training and development offerings. (For thoughts on helping them navigate working in an office for the first time, you might like this blog.)
We recently had a bunch of soon-to-graduate college kids around our dinner table, and one of them had a lot of questions about financial basics. He’s starting an engineering job at Microsoft after graduation, presumably at an impressive salary, and is feeling uncertain about things like how to budget, what to do about the 401K, how to decide what to spend and what to save from each paycheck. We’ve heard some of the same financial wellness questions from our own early-career employees at Tribe.
At the same time, we’ve seen many of our clients expand their definition of employee wellness to include mental, emotional and financial wellness. A study by the the Employee Benefits Research Institute indicates that over 75% of companies with over 10,000 employees have a financial well-being program in place. And according to Gallup, employees with “thriving financial well-being are less stressed, more innovative and harder to poach.”
For these first-time professionals, financial wellness might need to start with some very simple guidance. Below are five topics to consider. (A few might be more basic than you’d expect.)
They know the 401K is important, but don’t understand the concepts of pre-tax and compound interest.
Plus, the language around employer matching contributions can be confusing, with clauses like 100% matching up to a certain percentage of salary and 50% for a different percentage above that. If the 401K isn’t explained well, they may just skip it altogether
They want the financial security of non-retirement savings, but don’t know where to start.
The classic advice of saving six-month’s worth of living expenses in case of emergencies can be a little overwhelming when you aren’t even sure yet what your living expenses will be. Introduce the idea of setting up an auto transfer every month from their checking to a savings account, money market or index stock fund. At this stage, developing the habit of consistently diverting some income to savings is probably more important than the amount they’re saving each month.
They don’t understand the impact of tax allowances when filling out their W-4.
If you’ve never held a full-time job, you might not get the difference between withholding taxes and paying taxes. Help them understand that the more allowances they claim, the less tax will be withheld — which is not the same as paying less tax. Early-career employees can be thrown into financial stress by a surprise tax bill in April.
They know a budget is a good thing, but may not know how to use one.
Setting up a budget is one thing; managing your actual spending against a budget is another entirely. They’ll likely have an easy time finding an online budgeting platform they like, maybe even a free one, and assigning numbers to various categories. But many won’t know how to accommodate infrequent or unexpected large expenses, or what actions they might want to take if their monthly spending is consistently over budget. Financial wellness means living within your means.
They don’t get the tax difference in giving to a charitable organization vs. GoFundMe.
Many in this generation are driven to help others, whether those others are groups or individuals. Although they probably know that some charitable contributions are tax deductible, they may not understand the difference in giving to a registered charitable organization and an individual in need. Giving money away is one of the joys of making money, and they may prefer to make monetary gifts to causes or people they care about, without regard for the tax implications. But help them understand what makes a charitable contribution tax deductible.
Interested in engaging and retaining your Gen Z employees? Tribe can help.