A new study suggests that the next generation of workers, led by Millennials and Gen Z, is more focused on addressing short-term financial challenges than longer-term goals.
Consequently, the next generation of employees, hindered by inflation and debt, has prioritized becoming financially independent rather than preparing for a traditional retirement, according to Financial Finesse’s 2021 Financial Wellness Year in Review.
“Over the last 10 years, much of the focus in the financial wellness space has been on retirement preparedness but employee views are changing,” says Greg Ward, Director of the Financial Finesse Financial Wellness Think Tank. “These incongruous macro trends led us to investigate changes in employee behaviors and concerns over the last three years [2019-2021],” he explains.
The firm’s analysis found that younger employees are stressed, with 81% of Millennial and Gen Z employees reporting that they are experiencing some level of financial stress and 40% are uncomfortable with their debt.
And while overall financial wellness scores held steady at 5.3[1] (on a 10-point scale), improvements in cash flow and debt management (immediate concerns) were offset by declines in retirement, insurance and estate planning (future concerns), the firm notes.
Among employees who completed a financial wellness assessment for the first time, the analysis found that the percentage contributing to their workplace retirement plan dropped by 7%, from 91% to 84%. Similarly, the percentage “concerned about retirement planning” dropped by 6%.
The study also found that while the percentage of financially resilient workers[2] increased from 34% in 2019 to 40% in 2021, this improvement was offset by a decline in financial security from 28% in 2019 to 26% in 2021.
As such, with the pandemic and economic turmoil introducing new financial challenges, financial well-being benefits are now considered a must have by today’s jobseekers, who are not afraid to leave for better pay and benefits, the firm suggests.
“Employees have very different expectations of their employer than they did before the pandemic,” says Financial Finesse Founder and CEO Liz Davidson. “There’s a much greater sense of free agency among job candidate who, with low unemployment, have very high leverage and are using it to demand benefits previously considered nice to have.”
For those who are motivated to improve their finances, Davidson says they are seeing employees actually choose employers specifically because of the quality of financial wellness coaching they provide, something she notes that was unheard of pre-pandemic. She explains that the employees they work with say there are two reasons this has become such an important consideration in deciding where to work:
- they feel financial wellness coaching, along with mental health support, is an important “signal” of a company’s culture and how much the employer cares about employees; and
- they recognize that it’s not just compensation and benefits that matter, but also getting the best possible guidance on how they can maximize their compensation and benefits to achieve their most important financial goals.
“For employers looking to attract and retain talent through the Great Resignation and beyond, financial wellness coaching benefits are often the solution hiding in plain sight,” says Davidson. “Quality financial wellness coaching benefits, proven to reduce financial stress and increase financial resiliency in the near term and improve retirement preparedness over time, are a differentiator and, for many employees, a life-changer.”
The financial wellness data in the report is compiled by tracking employees’ usage of Financial Finesse’s Online Financial Wellness Assessment and Financial Wellness Hub. This report is based on the analysis of 111,580 initial financial wellness assessments completed between 2019 and 2021.
Footnotes
[1] Based on this score, employees are demonstrating some personal financial skills, but have significant gaps in their overall financial planning and behaviors, and really need education and guidance to make decisions and develop financial habits that will allow them to achieve their goals.
[2] Defined as having a handle on cash flow, being comfortable with debt, paying credit-card balances in full and maintaining an emergency fund.
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