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Financial Wellness: Why Money Management Counseling is Such a Good Idea
Debt counseling and money management education can make a big difference for employees

Ask anyone who’s just had that first serious thought about planning ahead for retirement what they wish they had done differently, and they’ll all tell you the same thing: they wish they had started planning and saving much sooner.

But that’s only part of the “financial wellness” picture.

Offering basic financial education and counseling to employees is a chance for employers and benefits management pros to do something really useful for employees.

I would say from the start that financial wellness resources should really fall into two categories: debt counseling services and financial planning education. The reason is simple: they are different in a lot of ways.

Out-of-control debt can be a huge life problem for people, creating anxiety and casting a shadow over everything else in their lives. In terms of long-term negative effects, it can be right up there with substance abuse.

That’s why offering access to debt counseling through the EAP is such a good idea. Like a lot of real problems that people are reluctant to talk about, the key here is to make sure that employees know that help is available and that they can access it in complete privacy and confidentiality. (Lunch-and-learn sessions on the whole range of EAP services are a good way to get the word out in a very non-threatening way.)

When it comes to financial planning, people give a lot of reasons for not doing anything. Most of us can identify with most of those reasons, but they represent a mindset that financial wellness planning has to address.

  • I can barely cover all my bills now, and I have nothing left to invest anyway.
  • I don’t know anything about saving or investing.
  • I’m uncomfortable with the whole idea, and it just makes me anxious.
  • Once I get ahead in my career, I’ll be making more money, and any little bit I put aside now will be irrelevant.
  • My house is my retirement savings plan.
  • Sure, I plan to start saving some time, but right now I’m getting this great vehicle.

My advice, based on what I’m told by our experts, and what I’ve heard from clients over the years, is to keep it simple. And I don’t mean “dumbed down,” I mean practical and uncomplicated.

By the way, an important thing to remember is that you – the employer – cannot and should not offer specific financial advice. It’s important to make that clear from the outset, and to make it clear again if employees ask for advice. You can explain the difference between an RRSP and a TFSA, even point out the advantages of both, but you can’t go beyond that with specific investment advice.

Here are some of the topics that many of our clients are already covering in their financial wellness programs.

  • How the company pension plan works. It’s surprising how many people, when they start a new job, pay little or no attention to the explanation of the pension plan. They see a deduction on their pay slips -- and that’s about it. But understanding how it really works – the employer contributions, the tax advantages, how the money grows, what happens to it if you change jobs – is basically all good.
  • RRSPs and TFSAs. Of course, most people have at least a general understanding of how these plans work, but just talking about them in a dedicated session will give them practical information, clear up any misconceptions -- or people’s natural inclination to suspect that there must be a catch – and get them seriously thinking about financial planning. (Then talk about direct deposit and automatic payroll deductions…).
  • Financial literacy. Many people would enjoy a general session on money, investing, mortgage rules, the ins and outs of tax laws, and a whole range of other topics. A chance to have a qualified person – and, above all, someone not trying to sell them something – available to answer questions in a session can be helpful to most of us.
  • Shopping for professional financial advice – when the topics above don’t cover it. Once you have maxed out your RRSPs and TFSA, where to you go next? Do you need professional help? What are your major options? And so on.

One of the great things about all this – I think of it as entry-level financial planning – is that it has a very good chance of sticking, and making a big difference in the lives of employees in the long run. A big reason for that, oddly enough, is online financial services: if you set up an RRSP and/or a TFSA, you can see your money and watch it grow every time you go online to do any kind of transaction. Pretty soon, people are talking about “my RRSP” or “my investments.” That can be very powerful in setting people on the path to financial freedom.

If there is a topic that you would like me to write about, please email me at bill@penmore.com.

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