Financial Education - Employers Stepping It Up As They Step Into the Gap

Everyone agrees: financial literacy matters. Everyone agrees: the financial skills of those entering the workforce are limited. Over the last 20 years Employers, because of their commitment to their employees and to their defined contribution programs, have responded by directing a massive adult education effort explaining the benefits of long-term saving and the nuts and bolts of investing. Seminars/workshops, Webinars, CDs, e-mail, modeling software, books, newsletters and printed pieces are all being used to help America's workers understand the importance of being long-term savers and the principles of successful long-term investing. And the intensity and sophistication of this effort continues to increase as 401(k) service providers, taking advantage of some of the most creative minds in the investment community, have stepped up their delivery of financial education to America's 401(k) participants. Every day all over America workers are attending workshops and seminars. Every day all over America workers are receiving electronic and printed communications explaining the basic principles necessary for long-term financial success.

This effort is making a difference. Not only do 401(k) plans help Americans save for retirement, they also increase plan participants’ knowledge regarding retirement saving. According to Transamerica’s 11th Annual Retirement Study, those with access to a 401(k) plan are more likely to have a retirement planning strategy than those without one. Also the study found that those with a plan are more likely to be currently managing and monitoring their accounts and actively be thinking about saving for retirement. They’re more knowledgeable, too. According to the study, education regarding asset allocation principles, catch-up contributions and the saver's credit rises with an individual’s 401(k) plan participation rate. Plan participants are even more realistic—both about the amount they will need to live comfortably in retirement and the age at which they will retire.

As anyone who has worked in adult education knows, adult education is heavy lifting. Adults are distracted by the details of everyday living, and just getting their attention can be a challenge. Adults have preconceived notions, and you have to give reasons why they should pay attention and, more importantly, take what they're learning and apply it. Our education system can barely teach significant numbers of our children to read, let alone explain the principles necessary to execute a successful lifetime financial plan. It is fortunate that America's employers, partnering with their financial services partners, have chosen to do what they can to remedy the situation.

David