Generational Differences Behind Savings Goals — Why are Employers Forcing a Circle into a Square?

There was a time when offering a paycheck, robust health insurance, and a retirement savings account was enough to entice talent, keep employees for decades, and satisfy overall employee well-being.

Today, this combination is falling short. With rising healthcare costs, living costs, and mounting debt, paychecks and 401(k)s alone are no longer enough to help employees reach their short-term and long-term savings goals. In fact, for many, “savings goals” are a pipedream — up there with winning the lottery. And, lack of savings isn’t just costing employees, it’s costing you.

Here are some facts:

Among Millennials, 20% expect to never pay off their debt and many are using a credit card to pay for basic daily needs like groceries and bills.
Almost 50% of Gen Xers admit to living paycheck to paycheck.
45% of Boomers have zero savings for retirement.
If faced with a large unexpected expense, 42% of employees said they would go into debt, dip into their retirement savings, or simply not know what to do.

And disturbingly, when government workers (who make more than the average private sector employee) are forced to take out short-term loans, rack up credit card debt, and pawn possessions to survive two-weeks without pay, we should know something is very wrong.

Generational differences

Americans are simply not saving enough across all generations. Keep in mind, “saving enough” doesn’t mean the same thing to a Millennial vs. a Boomer. Each generation faces unique challenges that require new savings strategies.

For example, despite positive numbers indicating that Millennials are actually good at saving for retirement, it’s clear that they are struggling to pay for basic day-to-day necessities. Gen Xers are in the difficult position of taking care of aging parents and saving enough to put their kids through college. Plus, the numbers show that they, in comparison to all other generations, have the most credit card debt. Boomers are retiring in droves, but with rising healthcare costs and lack of savings, some are having to stay in the workforce longer.

All of these challenges are extremely stressful. And that stress is costing you.

Employee financial stress costs real dollars and negatively impacts employee mental health.

Recent data indicates that employees with high levels of financial stress lost 41% more work time to absences compared to employees with low financial stress. Financially stressed employees have lower engagement levels and are less productive overall. Plus, those suffering from financial worries are more likely to suffer from mental health issues like anxiety and depression.

And the savings crisis is only getting worse. The good news is, HR is uniquely positioned to help their employees save, reduce stress, and feel more engaged at work.

So why is HR only providing a one-size-fits-all approach to savings?

It’s true, most employers are offering retirement benefits to employees which is a solid and appreciated benefit for long term saving. Plus, enrollment in consumer accounts like HSAs are on the rise. But when 70% of young people define financial stability as being able to pay all their bills each month, these offerings aren’t quite hitting the mark. Think about it. HSAs and FSAs are great for healthcare costs. But what about buying groceries? Repairing a broken windshield? Child care and elder care expenses? The paycheck is the only resource employees have at their disposal to take care of these short-term costs. And sometimes, especially with surprise expenses, it’s not enough. What are employees using to bridge the gap? Retirement funds.

This is a worrying trend that was highlighted during the government shutdown. In a recent report, 42% of employees said it’s likely they’ll need to use their retirement for expenses other than retirement. This is a dangerous cycle that needs to be broken.

Employees need an easy button.

Employees are not simply looking to their employers for a paycheck any longer. They are hoping to find a support system they can depend on to reach their goals. Those organizations who put employees’ financial and holistic well-being at the top of their HR strategy will see immediate returns. Sixty seven percent of employees said they would be attracted to an employer who cares more about their finances. Furthermore, caring for employees’ needs demonstrates empathy, and 93% of employees say they’re more likely to stay with an empathetic employer. The data doesn’t lie, so what’s the next step?

Making saving easy. Nearly 75% of businesses today that offer a 401(k) plan already automatically enroll their workers. This tactic alone is seeing promising results including a jump in utilization and very few opt outs. This same theory could work with a short-term savings account that addresses the needs of employees today. Helping employees with everyday expenses and stresses is a win/win in terms of ROI. And guess what? Those organizations that start to offer short-term savings accounts are going to be head and shoulders ahead of the game.

Want to learn more on how to support your employees? Check out our guide below for more tips and strategies.