Anthony Carter
Director, Financial Wellness, Retirement & Wealth
Growing up in the northern Utah mountains, my summers were filled with hiking and backpacking adventures. Winters were spent skiing, and my big brother was my first skiing partner. He was (and is) a much better skier, and those days always felt a bit like ski school. One morning, while standing at the edge of a steep ravine, he asked me to imagine where a stream would flow if water were to cascade down the slope. “That’s called the fall line,” he explained. “It’s where gravity wants to take you. Follow the fall line.”
This lesson has stayed with me, not just on the slopes but in life, especially when it comes to personal finances. Just as skiing requires a clear path to navigate the mountain, managing our finances needs a strategic approach. In today’s complex financial environment, many employees may struggle to find that path. Unfortunately, 57% of full-time workers say finances are the leading cause of stress in their lives and one in three reports that money worries have negatively affected their productivity at work.
Employers have a unique opportunity to guide their teams toward financial wellness. By helping employees identify their financial “fall line,” organizations can assist them in balancing immediate needs with long-term goals. This article introduces the “next-best-dollar approach,” a straightforward method for managing personal finances that is part of MMA’s offerings. This savings hierarchy enables employers to support their employees in achieving financial stability and peace of mind.
Understanding the nature of savings
Saving is a verb. It’s active and moves its own goalposts. Unexpected expenses will arise, prompting employees to reassess their financial priorities. This reality highlights the need for workplace programs that recognize the cyclical nature of financial journeys. Employers should create an environment that normalizes financial reprioritization instead of stigmatizing moments of regression. Just like exercise or healthy eating, savings will have its ups and downs. Viewing financial wellness as a linear process increases the chances of giving up at the first hurdle.
The next-best-dollar approach: an overview for employers
Deciding where to allocate savings is a common challenge for many households. With the complexity of financial products and differing advice, employees often find it difficult to make informed decisions. The next-best-dollar approach provides a clear plan for savings, allowing organizations to help their workforce maximize financial potential while addressing immediate needs.
Five important steps for financially supporting your employees
1. Use employer matching for retirement contributions.
The first step is to encourage employees to contribute to workplace savings plans that enable them to receive the full employer match. With 66% of workers having access to workplace retirement plans and 98% of plan providers offering matching contributions, organizations should actively promote this opportunity to their employees. Eligible employees can also benefit from the Saver’s Credit, which provides a tax credit for retirement contributions.
Matching contributions are "free money" and represent an immediate return on investment that is hard to beat. By taking advantage of these benefits, individuals may boost their retirement savings without significantly affecting their short-term financial needs.
2. Support efforts to eliminate debt.
Next, organizations should focus on initiatives that help employees eliminate high-interest debt, such as credit cards and personal loans. The interest rates on unsecured debt can exceed 20%, so it makes sense to pay off these debts before investing further. By providing debt-management resources and promoting a culture that encourages financial reprioritization, employers can improve their employees’ financial health.
3. Promote the establishment of emergency savings funds.
According to the Consumer Financial Protection Bureau, having liquid savings is the strongest predictor of financial well-being. However, this emphasis on savings often conflicts with traditional workplace wellness programs that focus on retirement contributions. Research shows that 58% of households have less than $400 available for unexpected expenses, and Mercer reports that about 5% of total payroll is at risk of being spent on employees worrying about their finances during work hours.
Employers who adopt a holistic financial wellness approach, including solutions for emergency savings, often see greater engagement with retirement benefits. In fact, the Commonwealth found that employees with emergency savings are 70% more likely to contribute to retirement savings plans.
4. Encourage full funding of Health Savings Accounts (HSAs).
If eligible, organizations should encourage employees to fund their HSAs fully. These offer three tax advantages—tax-deductible contributions, tax-deferred growth, and tax-free withdrawals for qualified medical expenses. Despite these benefits, HSAs are often underused. Employers can emphasize the importance of HSAs through contributions, education, and clear communication.
5. Facilitate contributions to help reach target retirement savings rates.
Finally, organizations should encourage employees to contribute enough to meet their retirement savings goals. Regular contributions to retirement accounts enable individuals to benefit from the power of compound interest and grow their assets over time. At MMA, we offer personalized support to help organizations guide employees in determining their unique savings rates, which can significantly increase engagement.
Building a strong financial foundation for employees
By successfully navigating these five steps, employers will help their employees build a solid financial foundation, allowing them to pursue additional goals such as education, homeownership, or travel. Each employee’s financial situation is unique. The next-best-dollar approach provides a structured framework, but strategies should be customized to individual circumstances.
Organizations that recognize the cyclical nature of financial planning are more likely to achieve their financial wellness goals and create a culture of empathy and understanding. For more insights on the connection between health and wealth, employers can refer to MMA’s Building the Bridge report on integrating employee well-being programs.
Next steps for the employer
To empower your employees in managing their financial futures, it’s essential to design a program that adapts to their existing circumstances. By using the next-best-dollar approach, you can create an inclusive financial wellness program that aligns with your strategic goals. We encourage employers to partner with a knowledgeable broker who can offer tailored guidance and support in developing a comprehensive financial wellness strategy. At MMA, we can help you evaluate your current offerings, identify gaps, and implement effective solutions that resonate with your workforce.
Together, we can develop a strategic plan that boosts employee engagement and drives productivity and retention. By investing in your employees’ financial well-being, you show your commitment to their success. Reach out today to start building a financial wellness program that addresses the unique needs of your organization and empowers your employees to thrive.
