Part 3: CFED: Financial Security at Work

For the third installment of our blog series on CFED’s initiative on Financial Security at Work, sponsored by the Prudential Foundation, we will present promising practices to help grow and strengthen the field. Part 1 explained the need for workplace-based financial capability services and Part 2 highlighted different program models that have been shown to be effective.

Millions of low- and moderate-income workers each year struggle to reach financial stability. The workplace—whether it be in a restaurant, office building, hospital or construction site—is where most of us spend the majority of our week. As we look for opportunities to help more low- and moderate-income households reach financial stability, the workplace feels like a natural fit.
During our field scan, literature review and discussions with experts in the field, we identified several promising practices that employers need to think about as they develop their own financial wellness programming. As more workplaces launch such programs, we need to ensure that programs are building upon what has been done and learning from promising practices.

Develop the program with an employee-centered approach

As CFED has learned through work with low- and moderate-income consumers, a financial capability program won’t be effective unless employees see that it solves a real problem for them. Programs that start with an employee needs assessment will be able to identify where their employees are experiencing the most financial challenges and respond with effective products and services. This is necessary in order to determine the expected levels of participation and choose offerings that can have the most impact.

Learning about their workforce’s current financial situation will help employers implement a program that employees will actually utilize. The Administration for Children and Families at the U.S. Department of Health and Human Services, in partnership with CFED, lifts up similar practices in Building Financial Capability: A Planning Guide for Integrated Services, which starts with a client-centered approach and encourages solutions to be built around the client. Employers who are interested in starting a financial wellness program in their workplace should always take a step back and start by identifying employees’ needs and challenges.

Focus on behavior change

The key to lasting financial security is to change financial behaviors. Research has consistently shown that in order to improve financial outcomes, programs need to equip participants to put their financial know-how in action even after they leave the program. Programs that encourage automatic enrollment, split deposit into savings accounts or auto-escalation lay the groundwork for consumers to continue to practice good financial habits for years to come.

It is important to move away from programs focusing entirely on financial literacy that do not create opportunities for long-lasting behavior change. Instead there needs to be a focus on giving employees access to resources, tools and products that allow them to continue to make sound financial decisions.

Address the need for products for both short- and long-term financial needs

Many workplace-based financial wellness programs are primarily focused on retirement savings. However, research has shown that, although retirement is an important issue, there is also a need for access to more short-term savings products in the workplace. Low- and moderate-income workers are especially vulnerable to falling into a cycle of debt due to unexpected financial emergencies. Something as simple as unplanned car maintenance could lead to debt if the worker doesn’t have the savings to cover it; this, in turn, can cause stress and contribute to absenteeism in the workplace. In addition, workplace-based savings programs could help workers who struggle to save for other non-retirement assets, such as postsecondary education or homeownership.

Track program impact

Asking participants for feedback allows employers to see what is working and what is not, so that adjustments can be made to the program. Just as employees must take the necessary steps to change their financial behaviors, employers must make sure their efforts are effective and are providing the needed services.
Similarly, programs should establish systems to track participation and engagement. For example, employees often receive quarterly statements for their retirement accounts, which allows the employee to see progress and track savings and allows employers to track how many employees are participating in the retirement account or how many are escalating contributions. With this information employers can change strategies for targeting outreach or changing workplace policies. This type of tracking needs to be done in all financial capability programs that are implemented in the workplace.

Moving Forward

As the field grows there is a need for additional research to identify more promising practices. The GAO highlighted that while “there is much research on interventions related to retirement savings, there is less information available on the effectiveness of interventions related to other financial issues.” There are several reasons for this, but one reason is that measuring effectiveness of different programs can be difficult and often arbitrary. Many evaluations of current programs mostly focus on employee’s “satisfaction” or programs’ “perceived impact,” rather than looking at a quantitative measures, like increased savings or decreased absenteeism. As a result, although a program can be seen as working, it is difficult to determine to what extent and which aspects of each program are most beneficial.

One of the reasons for this is that there are often issues with privacy. In order to test whether or not interventions affect individuals’ financial security, researchers or outside evaluators need access to individuals’ financial information. Understandably, few employees are willing to provide this information.

However, we believe there is hope. A few decades ago, the large presence of workplace health and fitness programs may have seemed farfetched. But as employers became the primary vehicle for health insurance, they saw the benefit to having a healthy workforce. Today, incentives for employees to join gyms, participate in “number of steps” per day challenges and join on-site exercise classes are common. This shift occurred as workplaces saw the benefit of having a healthy workforce. As financial instability grows in millions of households around the country, we can only hope a similar shift will occur related to financial capability.

As pensions become a thing of the past and wages stagnate, employees are forced to take a more active role in managing their financial futures, and employers have a role to play to stabilize their workforce financially and ensure that they are able to be productive.

Tomorrow we will be publishing our last blog of the series which will highlight some unanswered questions and some thoughts about moving this field forward.