EL SEGUNDO, Calif.-Workers at companies across America have reduced their financial stress significantly and improved their financial literacy over the past year, according to a new study by Financial Finesse.
Nancy Anderson, director of Financial Finesse's Think Tank of Certified Financial Planner professionals, told Credit Union Journal the question for employers now is how to sustain the progress that's been made. Financial Finesse provides financial counseling services to employees of various companies, including credit unions.
"Overall we are seeing good news, but credit unions should keep the ball rolling," Anderson said. "Credit unions are in a position to help their own employees and their members learn more about their finances."
Financial Finesse's "Year in Review 2011" found employees are experiencing less financial stress as they continue to better manage their day-to-day finances. Since 2009, the firm said the percentage of employees reporting "high" or "overwhelming" financial stress has dropped "significantly," to 19% from 33%. Financial Finesse said there appears to be a "distinct correlation" between a growing number of employees able to comfortably manage their finances and reduced stress levels.
What The Study Found
The 2011 report continued a trend seen in the company's 2010 research, which showed employees are focusing on what they can control to improve their financial situations in light of a "slow" economic recovery.
Employees continued their personal recovery in 2011, the study found. Financial Finesse said many respondents demonstrated lasting behavioral change in how they are managing their finances after the recession. Employees improved their financial situations significantly in several areas, including:
* Cash flow management: 72% of employees reported spending less than they made each month in 2011, versus 56% of employees in 2009.
* Building an emergency fund: 56% of employees reported having an emergency fund in place in 2011, versus only 39% in 2009.
* Focusing on long-term planning issues: 62% of questions received by the firm's Certified Financial Planners specifically addressed retirement and other long-term planning issues in 2011, versus 43% of questions in 2009.
Employees are still uncertain they are on track to retire, despite improvements in financial management. Only 17% of employees feel prepared to meet their retirement income needs, which the firm said illustrates employees' growing awareness of their personal responsibility to fund their own retirement, as well as their concerns about the economy and worries their nest eggs will be eroded by increases in taxes, inflation, and health care expenses.
Anderson said while it is good news that more and more people are paying off their credit cards in full and building an emergency fund, there is a concern that when people see good financial news they once again will start spending beyond their means.
"Cash flow management is the foundation of any financial plan," she said. "Employees report they are spending less than they make, which we attribute to several causes. Many state and federal government employees had furloughs, lost hours or took pay cuts. If a person did not lose a job they knew someone who did. It became cool to save money. The extreme couponing movement made it okay to be frugal. This led to managing money and staying out of debt."
Another shift Anderson has observed is extreme early retirement. She said many members of Generation Y who are under 30 are saving as much as they can now so they can retire early.
"Some are living on 25% of their salary and saving 75%," she reported. "This is part of the shift in society to self responsibility and healthy frugality."
Since 2009 consumers have become much more focused on long-term issues and goals, Anderson continued. She said people who telephone or e-mail Financial Finesse with questions are much more interested in estate planning and/or setting up a will, rather than asking how they can get out of debt.
"Americans now have their eye on the ball," she said. "The silver lining of the recession is getting people to focus on these issues. Consequently, the workshops and promotions credit unions do for their members and employees should focus on these types of topics."
'Looming Retirement Problem'
Despite this recent surge of interest in long-term planning, Anderson warned American employees in general still face a "looming retirement problem."
"In this new era of self-responsibility people are focused," she said. "But what concerns us is only 17% of employees say they know they are on track. Only 33% have used a retirement calculator to figure out what they will need, meaning 67% are in the dark. That is really important for credit unions-they need to provide workshops so people can know if they are behind and need to focus on retirement, or if they are on track and can reduce their stress."
More education is needed, Anderson explained, because sometimes people avoid using a retirement calculator believing it to be too complex.
"There are a lot of assumptions to be made, plus adjustments for inflation," she noted. "Credit unions should be sure to have their own employees present at all financial seminars. This is a win-win for credit unions, because as employees improve their personal situation through financial wellness programs it creates a culture to promote it to the members."
