EL SEGUNDO, Calif.–Millennial employees who make small improvements in how they manage their personal finances can increase their lifetime retirement savings by 12%, according to a new study released by Financial Finesse.
The 2016 Generational Research study reveals that younger employees who make modest changes in behaviors, such as having a small emergency fund in place, tracking expenses and paying down some credit card debt, are more likely to increase their average retirement plan contribution rate, according to Financial Finesse, a financial wellness firm that said it has helped more than 600 companies nationwide offer free financial coaching to more than 2.4 million employees as a workplace benefit.
The study’s findings are based on analysis of financial wellness assessments completed by more than 35,000 employees in 2014 and 2015. The study determined that younger employees who improved their financial assessment by one point (from 4.0 to 5.0 on a 10-point scale) saw a 12% increase in their average retirement plan contribution rate.
Increasing employee financial wellness an additional point to 6.0 is projected to result in an improvement in lifetime retirement savings of over 27% based on the model, according to Financial Finesse, which says it defines "financial wellness” as a state of financial wellbeing where employees have minimal financial stress, a strong financial foundation and a plan in place to achieve key financial goals.
Among other key findings from the Financial Finesse study:
- Baby Boomer employees, defined in the analysis as those ages 55 or older, had an average financial wellness score of 5.7, demonstrating some personal financial skills, but with significant gaps in their overall financial planning.
- All generations are facing increased challenges paying off their debt, with significant risk of becoming over-leveraged, especially if the U.S. economy experiences another recession. Baby Boomers, who are already facing challenges saving enough to retire, are particularly vulnerable here. They had the biggest decrease in the percentage that have a plan to pay off their debt (64% to 58%) and the biggest increase in those that are experiencing late fees (11% to 15%), Financial Finesse said.
Financial Finesse said that on the positive side, the report highlighted a growing trend towards employees becoming more proactive about their finances and taking steps to assess their personal financial situations.
The report can be found at https://ffinesse.box.com/v/2016GenerationalResearchReport