Fostering Financial Literacy Where It Matters Most

Long-term financial stability is top of mind for Canadians, yet not enough of us have a formal plan to save towards our long-term goals. This is true for many workers, regardless of profession or earning level. As we heard on the last episode of Contributors, even lawyers are susceptible to postponing personal financial planning, which has led to some delaying retirement or thinking they will never be able to retire.

Amid the increasingly competitive race for talent, Canadians recognize that there is an emerging retirement income crisis and that employers need to be part of the solution. Across all income levels, a majority of Canadians (77%) and employers (70%) say that employers have a responsibility to offer a pension plan so that employees can have adequate retirement income.

Employers want to maximize the value and outcomes of their benefit program spend. A good plan offers a clear business case by attracting and retaining top talent, enhancing productivity and minimizing the costs of recruiting, training and severance. Securing employees retirement is also aligned to the “Social” in ESG.

The earlier a structured automatic savings routine is started; the better positioned employees will be to maintain financial stability today and in the future.

Yet studies show that too many Canadians are saving inconsistently or insufficiently and are at significant risk of outliving their savings and drastically lowering their standard of living.

A common pitfall is trying to “beat the market,” a notion that many of my friends and family hold. Few individuals can reasonably predict investment markets into the next 30 to 40 years – the period that they accumulate savings that they will draw from in retirement. I am proud of saving friends from losing most of their savings when they hear about “the next sure thing” …which later implodes.?

Another common pitfall is simply not knowing the true cost of living in retirement. While 61% of Canadians consider health and long-term care a key retirement priority, 66% admit to having limited or no understanding of the costs they should be saving for to live well, such as in a long-term care home where the average national cost is $33,349 per year. Canada Pension Plan and Old Age Security are designed to only cover basic living expenses but do not cover the quality of life that retirees want.

Financial stress is a distraction in the workplace. Canadians understand the importance of saving early but finding the tools and time to plan can be a challenge. Employers can enhance productivity and reduce stress by supporting financial literacy throughout their employees’ tenure and helping employees saving with automatic deductions and matching contributions.

Simple Ways to Help Employees Save

Employers play an important role in the retirement ecosystem in helping employees save while they work with automatic payroll deductions and employer-match contributions. Surveys show that employees want this help from their employers to accelerate their savings. They might have overlooked the option during onboarding, but they shouldn’t leave money on the table any longer.

The most influential factor to motivate employees to begin saving for retirement is an employer-matched contribution savings program, like DBplus.

Employers should find a program that meets their risk tolerance, workplace wellness and benefit goals. Turning to external experts can relieve the business of the time, cost and risks of running a program, while gaining the recruitment, retention and stress-reduction benefits.

Established and trusted pension providers, like CAAT, can help employers leverage ready-to-use retirement planning videos, on-demand webinars and pension estimators for internal communications and total rewards campaigns. Tap into the content library of financial education available to share on employee-facing channels. Employees can avoid financial planning pitfalls if they know that the better pension programs, or “Maple model” plans, can deliver more than twice the value of DIY savings programs.

Retirement planning is smart financial planning, and it’s time for employers to bring financial planning into the workplace. Employers can nurture a more productive, engaging environment, while demonstrating a commitment to the long-term financial stability that employees and prospective talent value.