Continuous Financial Wellness Programs Most Effective

Numerous surveys and reports, including Wellable’s 2018 Wellness Industry Trends research, identify financial wellness as a key area of focus for employers looking to improve the overall health and well-being of their employees. Most employers satisfy the financial wellness needs of their employees by leveraging free resources from their 401(k) provider or offering a single seminar or webinar on general best practices in financial health. These initiatives certainly “check the box” and are better than nothing, but it should come as no surprise that they have limited efficacy.

A study from the Pension Research Center at The Wharton School at the University of Pennsylvania researched financial wellness programs and found that it helps to offer financial education continuously. That is, financial wellness programs that had follow up meetings were most effective. According to the study, these strategies “help employees retain knowledge acquired via the program. In this case, financial education delivered to employees around the age of 40 will optimally enhance savings at retirement close to 10%. By contrast, programs that provide one-time education can generate short-term but few long-term effects.”

For employers looking to create long-term, sustainable changes to employees’ financial behaviors, the research suggests that an annual financial wellness seminar may be insufficient. Rather, employers need to treat financial wellness similar to the way they treat physical activity or nutrition programs. They need to offer more resources throughout a year to support healthy financial behaviors. These programs and interventions can be onsite and/or digital.

After the program expires, we see that those who participate in the program cut back on their investment. Along with the depreciation in financial knowledge, this leads to a dampening of the program’s effect when it is offered. After the initial ramp-up in financial knowledge, the marginal effect on behavior is quite small. The net effect of a one-year program offered at age 30 is quite small, particularly by the time the worker attains age 65. In other words, a one-time financial education program may have little effect, as expected, but the long-term effects of a persistent financial education program can be quite sizable.

The research also reviewed the demographics of likely financial wellness program participants. It found that people between the ages of 40 and 60 are the most likely to participate in workplace financial wellness programs, since this is when they tend to save the most in their working lives. It also found that financial wellness program participation was higher across all age groups for employees with higher education. This is likely the result of these employees having higher compensation and more to gain from financial education.

The researchers did note that limited research has been completed on financial wellness programs to date. As such, larger and more comprehensive studies are needed to identify and validate claims, including a study with random program assignment to research the effects of financial programs on participants. Hopefully, this is the first of many studies that will help employers identify a path to success for employee financial well-being.