Top tips for converting financial education into action

Employers are increasingly looking to provide financial education in the workplace. This has the potential to have a huge impact - but how can you make sure that education turns into action?

The last thing you want is to invest time and money on financial education, without actually leaving employees better off. The following tips will help ensure your financial education inspires your employees to take action.

Focus on goals, not products

One of the cardinal sins of financial education is to focus on explaining products (e.g. the details of a particular pension scheme), rather than starting first with goals: What are your hopes and dreams for the future?

Are your employees looking to buy their first house? Have they just had their first child? Or are they approaching retirement? In each case, encouraging reflection on what they would like the future to be like, and how much they would need to make that happen, is the crucial first step.

No one is particularly motivated to contribute to a pension (or other financial product) for the sake of it. We do it because it’s the most effective way to ensure that we can live the life we want in retirement. Connecting financial actions today with your employee’s biggest hopes and dreams in the future will inspire action more than anything else.

So, no matter how you provide financial education for your employees, the crucial first step is to make sure it’s focused on helping them achieve their goals.

Offer the education that your employees need

The additional benefit of asking employees to think about their goals is that you’ll also learn what you should be educating them about.

It’s easy to focus on pensions, with every company now providing one. But if a large section of your workforce are most interested in buying their first home, you better make sure your financial education offering covers mortgages and the help to buy scheme. Financial education that doesn’t cover the topics that your employees actually need help with will undoubtedly lead to very little action as a result.

Make it real

So, you’ve helped your employees start to think about their goals. But how do you make the link back to finances?

Take the example of a “comfortable retirement” as a goal. What sort of things will they want to do in retirement? How much of a pension pot would be needed to do that? Employees will be shocked to learn that a £10,000 income through retirement (in addition to the State Pension) might require a pension pot in excess of £250,000.

Then they’ll be relieved to learn the power of compounding. Show them what contributing X% of their salary into a pension might lead to by way of a future pension pot. Explain how every £1 of net pay they sacrifice will lead to £X going into their pension. Then have them think about what that means by way of delay to their short term goals - probably not too much.

If you start from the end goal and work backwards, action becomes a no-brainer.

Make it personal

Running through case studies can be powerful, but since no-one’s situation is exactly alike it can still be difficult for employees to apply what they’ve learned to their own life.

A personal financial plan, tailored to the employee’s individual goals and circumstances, is the best way to translate financial education into a specific set of actions. A good plan shows a forecast of how your wealth is set to change over time, and what the impact of various actions (e.g. saving more each month, or starting to invest) would be. This means that, unlike more general case studies, each person will understand exactly what they should do to achieve their goals and why.

Fortunately, a good financial planning service need not be expensive (for employer or the employee). New technology has made creating personalised financial plans more affordable than in the past, and some services offer ongoing financial planning for just a few pounds per month.

Lower the cost of accessing expert help

No matter how good your financial education is, there will be some employees who require more in depth expertise. This could be for any number of reasons. For instance an employee who has a family member with a serious illness or disability might need more specialist advice on how to ensure the family member has sufficient care for the rest of their life.

Importantly, this might not be something that you are aware of and which the employee doesn’t feel comfortable proactively raising. For this reason, it’s really important to provide a way for all of your employees to access expert financial advice, when they feel it is the right option for them.

In November 2017 the government passed new legislation enabling Pension Advice Vouchers - a salary sacrifice scheme which allows employees to save up to £310 on the cost of financial advice. This new tax break ensures that all employees can access advice, meaning the employee can take the right action and avoid the delay that comes with not knowing what to do.

Summary

If you follow the tips outlined above, you’ll undoubtedly see an increase in the proportion of employees who use your financial education offering to make real changes to their finances.

By getting employees to reflect on what they really want their future to be like and tailoring your education offering to suit their needs, employees will engage much more with the content. If you’re also able to offer more personalised services and access to expert advice, you’ll find a significant proportion take action where they would previously have failed to do so.

Author is Sam Spurrell, Proposition Manager, Pension Advice Vouchers.

This article was provided by Pension Advice Vouchers.