Transcription:
Alyssa Place (
Welcome to Perk Up, a podcast about workplace culture and benefits brought to you from the team at Employee Benefit News. I'm Alyssa Place, executive editor at EBN with Perk Up, my colleagues and I are sharing the stories of businesses who have implemented forward thinking, covetable workplace policies and benefits, keeping their employees happy and their company's bottom line thriving. This week, associate editor Paola Peralta uncovers how employers are tailoring their financial wellness benefits to different generations in the workplace and why Gen Z's financial Habits might be getting a bad rap.
Paola Peralta (
Hello everyone, and welcome to today's episode of Perk Up. I'm Paola Peralta, associate editor at Employee Benefit News, and I'm here to once and for all dispel the myth that Gen Z workers aren't invested in their financial futures.
(
Gen Z, a demographic defined as anyone born between 1996 and 2010 has only been part of the workforce for a handful of years. As a member of Gen Z myself, I'm all too aware that we've quickly earned a reputation for being impulsive and disinterested in our finances, but being young doesn't always equate to being irresponsible. The real problem, putting a roadblock between Gen Z and healthy financial futures, we don't always feel like we have the knowledge base to start building our own financial security. That's why when Duffy Collins began his career as a financial advisor, he knew that he wanted to offer his fellow Gen Zers, those opportunities, and he wanted to offer that free of charge. Collins graduated from Boston College in 2019 with a degree in wealth management. Halfway through his studies, he realized that what he wanted most out of his profession was to help people on a more personal level. He wanted to be involved step by step with individuals who needed financial guidance but didn't have access to experts like him, often young folks of his own age group. Today, Collins is a financial advisor with Northwestern Mutual, where he provides traditional wealth management guidance to clients, but with the support of his employer. He's also known for taking on Gen Z client's pro bono. And while that's extra work on his plate, he says it's creating the opportunity since college to make a difference.
Duffy Collins (
Part of it is just impact and how much can we measure and how much can I really tilt the needle, right? I say I spend about a third of my overall time and effort in my practice kind of dedicated to specifically kind of people I'd say under the age of 30. The other two thirds I'm working with much older people that are in different situations. The more traditional, hey, higher income level, a little bit farther and more assets from a revenue standpoint. I think it's honestly kind of necessary to work with those hiring clients is just to develop revenue. But the reason I kind of dedicate a lot of my time with younger people is the impact is significantly more measurable. If I work with somebody that's in kind of the later end of their financial journey, sometimes, and this is the worst feeling as a financial advisor, sometimes it's too late to address a lot of problems, right?
(
If you didn't save enough for your retirement and now you want to retire, let's say you're 65, for example, you just simply didn't save enough along your entire career. No matter what strategy or technique I deploy to help you make the most out of what you do have, simple reality is the life that I think you deserve and the life you probably think you deserve. As somebody that's worked a career and now wants to retire, there's no magic where I can just create that, right? But when I work with somebody that's say in their twenties or early thirties, and I can encourage them to think, okay, just save more. Just invest more, be a little bit more meaningful and deliberate about the decisions you're making with your money, then 30 years down the road, that small conversation compounded over decades of now smarter decisions makes a huge immeasurable difference.
Paola Peralta (
Only 46% of Gen Z feels confident about their financial knowledge. According to Investopedia S 2022 financial literacy survey, which pulled 4,000 US adults via an online questionnaire and an effort to understand where the current workforce is on their financial journey. That's compared to millennials who feel 61% confident in their financial knowledge. Gen X, 54%, and baby boomers, 52%, 54% of Gen Z currently holds some kind of investment according to the same survey ranging from mutual funds and exchange traded funds to cryptocurrencies and NFTs. 45% of young professionals claim to have advanced knowledge of spending, and 42% felt the same about saving still debt management continues to be the largest hurdle for Gen Z when it comes to their financial shortcomings. Collins, as both an advisor and a 25 year old hesitates to blame age and youthful priorities for these struggles. Instead, he sees these generational divides as evidence of vastly different economic experience across demographics.
Duffy Collins (
I haven't really seen a massive correlation between age and priority. So what I can say is that I do disagree with a lot of the broad generalizations. Older generations look at what they've been able to achieve financially. For example, owning a home, graduating college is without debt. There's a disconnect there between. If you look at essentially the cost of those things relative to real wages, the cost of the home, the cost of cost tuition has grown exponentially compared to the rate that wages have been raising. So a lot of the way we measure financial success is like what are the things that we were able to essentially buy, unfortunately, for a lot of older generation to disconnect, oh, we were able to buy our home. We were able to move out by the time we were five, by the time we were 30, own a home outright, maybe be married already, maybe have a kid on the way, never really had to worry about student loans so they can say, therefore, because we're to buy this stuff outright, when maybe a lot of Gen Z is not going to be able to, even with the ability to save and everything they're going to say, therefore, we're more responsible financially.
(
And I've heard that kind of sentiment. I don't really believe it cause I'm saying, okay, there's different, we have different issues to face. We're dealing with home prices being through the roof, college tuition, being through the roof. Those are the kind of two financial goals in terms of what I'm hearing from all my clients is they want to buy a house, they want to put their kids through college, and then they want to retire those every, there's differences along the way, but for the most part, those three are pretty much in common. I would argue it's a little bit more difficult for our generation to those off their checklist, but I would say we're just as good savers, just as good perhaps as previous generations. I don't think that the one can argue. I just think it's going to be harder for us to measure.
Paola Peralta (
That was the case for Olivia Stover, who in 2019, when she was 24, moved from Florida to Chicago for a new job. Any young professional, getting a job out of college was an incredibly exciting achievement. But with it came a number of new stresses. Stover had to balance the cost of moving across state lines along with the new expenses, including rent, utilities, groceries, and Chicago's elevated cost of living, all with an entry level salary.
Olivia Stover (
For a lot of us, the job market wasn't what we thought it was going to be when we graduated. So of course then figuring out how to move and finding an apartment in a city where I've never lived in, I had three roommates right off the bat that I'd never met. So just because that was what I could afford at the time with my salary, I couldn't afford to live on my own or have less roommates or even live in a nicer apartment building, which I'm sure is something a lot of us was a harsh reality coming out of college. So yeah, I think budgeting for rent, for my own internet, access, the utilities bill even commuting, because even though I was technically working in Chicago, I did have to commute out to the suburbs to their headquarter office for a bit there. So a lot of it was a challenge, and I think it's an added weight when you're not in college and it's your first real big corporate job that , you've got to figure out how to do everything, especially in a time when you're in a pandemic and no one's maybe able to go out and everybody's dealing with either losses or just having to be a little bit more careful around family.
(
And along that way, it was a very long and challenging experience.
Paola Peralta (
Stover was grappling with how to manage her limited funds on a daily basis and create a foundation of savings. How much did she put into a savings account? How much should she put towards her student loans? How could she budget to afford a new apartment? Would there be anything left to put towards her 401k? Stover didn't know where to take these questions, and she wasn't sure that asking for this kind of financial literacy help was even appropriate.
Olivia Stover (
I didn't even get a 401K match until about six months in. And I have a very basic understanding I think that a lot of us have, which is, yes, it's contributing to a retirement fund, but you know, what percentage match should I be looking for? What should I be contributing month over month based on my salary? And in terms of other benefits, I think I had a background at all. So the 401K is really what my understanding extended to.
Paola Peralta (
Since her initial move to the Midwest. Stover has since changed jobs. Again, having joined the public relations firm next PR in March of 2021, she used what she learned at her first job to make the financial transition easier, but she still felt like she was navigating significant gaps in her knowledge. After all, a new title at a new company comes with not just a paycheck, but new benefit offerings. Yet again, she found the standard corporate benefit communications to be lacking.
Olivia Stover (
I think I got a 30 page manual that to have to read through with a fine tooth comb of the different offerings and whatnot. And of course, I think I was 22 at the time. I certainly wasn't going to sit down and read through all that. So yeah, I think that's a big problem facing our generation is because these are all new jobs for us and it's our first time either with a big corporate job that offers these types of benefits, we don't know what we should be looking for almost, and we don't know how to ask for help. So I think it is beginning to turn where it's more on the employers of making sure that their employees understand what's being offered and how they can take advantage of it, and how it even applies to certain financial situations. Because a lot of the entry level employees who are Gen Z are not worried about paying a mortgage or providing for kids or setting up for retirement in a few decades. So it's kind of become more of a two-way street, or at least I hope it is for our sake.
Paola Peralta (
Now, you might be thinking if you don't understand how to create a stable financial situation, that's what financial advisors are for. But for many young professionals like Olivia, that option can feel daunting or financially out of reach, especially when your nest egg is non-existent. But Collins is out to change that perception and help his generation understand that apathy is the worst approach to finances.
Duffy Collins (
I'd say the number one barrier for our generation in particular is actually kind of information overload. So it's not necessarily no mistakes that people are making because what I see more than actively making financial mistakes, which is what everyone's afraid of, is they don't want to do their wrong thing. What I see the most of is literally doing nothing right? Which is I think in many ways worse. The most digestible analogy for that is somebody who's maybe on the path to maybe living a healthier lifestyle or going to the gym and getting in better shape or something like that. I always use that in my meetings to make as an analogy for our career. Cause I think it's perfect, right? Somebody who's maybe never been in a gym who's never done any sort of diet or regimen, whatever, however structure you want to get into it, but you go into the gym for the first time could be one of the most intimidating things in the world, right?
(
Cause you're like, oh my God, I don't want to do anything incorrectly and embarrass myself. Well, realistically, no one's actually looking. And then the financial advisor in the situation is that's your personal trainer who's going to meet you at the door and make sure you feel comfortable and walk you through every possible exercise that you think will benefit you. But a lot of people are intimidated by both decisions. I don't know where to start financially, so I'm not going to do anything, but I encourage you, personal trainer, financial advisor, or not do some sort of exercise, save some money, right? Some doing something is often better than nothing.
Paola Peralta (
For those who choose to follow Collins' advice and do something, the results can be significant and swift. Dina Caggiula leads Vanguard's participant experience organization, and she's found that Gen Zers who take the leap into shoring up their finances, are excelling in some of the most critical aspects of financial planning. In fact, according to Vanguard's own research, employees under the age of 25 who work at an organization with auto enrollment, four ohk and retirement plans participate at a rate of 86% compared to just 24% who are actively participating in voluntary enrollment plans. The amount of money they're squiring away is also higher gen. Zers are saving at a rate of 7.2% compared to a rate of just 2% for those involuntary plans.
Dina Caggiula (
So they're actually telling us more so than millennials and baby boomers that they feel they will be able to achieve their retirement goals. So they tend to have a more optimistic outlook. They also are telling us that they're more likely to be able to enroll in advice solutions or be able to take guidance from online tools. So a lot of, again, our older generation is still skeptical of leveraging some of these online tools and functionality. Some of them are maybe skeptical of even turning the keys all over to a managed account service. But Gen Z is actually really open to those types of solutions. So I think the challenge for us, or the opportunity for us as record keepers is how do we give them more of that? How do we meet them in the channels where they most like to interact with us?
Paola Peralta (
And I think the question on everyone's mind is, where do their employers fit into this? We've heard from a young professional, we've heard from a financial advisor. So how can employers fit into this conversation?
Dina Caggiula (
I would say we really find that the areas of highest interests from employers tend to be around helping their employees manage their debt, particularly student loan debt, helping employees with emergency savings that became very prevalent during the pandemic years. And then lastly, helping them with other financial goals. So those are really the three categories I would say by and large hear from employers about and where we think employers can play a role. So if I took them one by one, I think in the debt space, more and more we're seeing opportunities where employers can partner with providers that allow you to kind of plan for how do you pay off that student debt? How do you maybe refinance those loans pending some of the secure act regulation? They may even be able to make match payments towards student loan debt. So I think that's an area of opportunity for any of our plan sponsors in the audience.
Paola Peralta (
Among all of the generations currently in the workforce, gen Z is the most likely to feel the financial weight of student loan debt. According to financial services company bank rate over 7.1% of millennials held balances over $50,000 in June of 2006, compared to 7.8% of Gen Zers in June, 2022. As of March, 2022, the average Gen Zer carried around $15,000 in student debt, and 7.4 million borrowers are 25 years old or younger. Typically, student loans are structured to take 10 years to repay. But a study conducted by financial consulting firm Ramsey Solutions shows that it's actually taking loaners closer to 21 years. Not only can employers have a hand in cutting that time down, but the 2021 Cares Act made it easier for them too. If they don't already offer some kind of repayment benefit through their standard benefit packages, employers can offer up to $5,250 in tax-free student loan repayment benefits through 2025.
(
In contrast, president Biden's most recent proposal to forgive up to $20,000 of debt for federal borrowers is in limbo with a skeptical Supreme Court considering arguments against his plans legal validity with the Covid era pause on federal student loan repayments set to expire in a matter of months, borrowers are bracing for the return of their monthly payments and waiting in suspense. As federal forgiveness hangs in the balance, that long-term debt can create short-term problems for borrowers. In addition to feeling uncertain about loan repayment and retirement preparedness, gen Z is also struggling to build emergency savings. Although there is a guaranteed boost from the federal government, the Secure 2.0 Act, which was signed into law in late 2022, allows employees to automatically allocate a percentage of their income saving up to $2,500 a year to pay for emergency expenditures without tapping into a retirement fund. But keeping track of every savings related policy and proposal is likely not on the top of every Gen Z's to-do list, which is why education and accessible resources are vital. But by Collins' estimation, that doesn't mean simply relying on vendors or advisors to provide that education. Employer provided benefits and resources should be discussed loudly and often at work. For organizations that offer these programs and benefits, promoting them can even help employers attract talent building a stronger workforce for the future. Collins explains it's time. He says, for organizations to step up their game,
Duffy Collins (
You don't know how many times I've helped literally hopped on a Zoom and had somebody pull up their little 401K portal and just be like, what is this? I don't even know what any of this means. I don't even know how to set up my own 401k. And I sit there and just tell them what everything means, and I help them decide their best options and whatnot. But I really, that's not my job as an advisor. That should be their employer's job to help at least give them the basic understanding of what kind of services they have and what kind of benefits they have on, especially on the retirement side, and then walk their employees on how to actually take full advantage of them. It's shocking to me. I'm like from a retention standpoint or from just the employee satisfaction standpoint. If you have great benefits, but you're not even sharing with your employees how to take full advantage of them, why do you have 'em in the first place? I would like to see a lot more dedicated time and also resources for most employers to just tell their employees what they already have and what's available tonight. Cause I think it's a win-win. People feel more secure, people feel more understanding
Paola Peralta (
For Stover as time has gone on. She's managed to find ways to navigate her financial situation with the help of a collection of tech tools with varying degrees of success. She's turned to major platforms, including TurboTax, mint.com and SoFi for investing. And in true Gen Z fashion, she's still on the lookout for new recommendations via social media platforms like TikTok and Instagram. But she's also come to embrace the expertise of a financial advisor and reliable professional expertise.
Olivia Stover (
I think there are a lot of tools out there, and I will admit, I've been subject to a few of the TikTok or Instagram accounts that help you get your finances in order or save or whatnot. But two problem facing our generation is there are so many options out there and that we're constantly flooded with advice from social media or commercials or however it goes. That's sometimes sitting down with a financial planner and just getting a professional opinion and path forward can be so much less anxiety for us trying to figure it out and can kind of help us navigate through what are best for me versus having to look at everything all the time to determine what we want to do.
Paola Peralta (
That call for help from his peers is why in the end, Collins set out to model his career the way he did. And although he's proud of the work he's managed to do himself, his hope is for people to know that the same services he provides are entirely accessible, even if he's not the advisor to provide them.
Duffy Collins (
It's OK to be intimidated by all of the concepts. Don't be intimidated by the resources that are out there in the world available to people to spread financial literacy. There's a ton of resources. It's not something unique to me that I don't charge some sort of an upfront fee, right? The industry has kind of moved towards that model, so people are a lot less helpless than they think they, and there's a ton of great people out there. So it's not just something.
Paola Peralta (
So before you write off your young employees as irresponsible or uninterested in their financial future, make sure to remember this podcast episode and talk to them about money, resources, and financial benefits at a time when recruiting and retaining employees is more critical and challenging. As ever, don't let your investments and supportive benefits and programs go to waste your employees, especially the young ones, are eager to take advantage of them. Take it from your friendly neighborhood, gen Z, me, I'm Paola Peralta with Employee Benefit News. Thanks for listening.
Alyssa Place (
Thanks for joining us. We'll be back in two weeks with a brand new episode on managing addiction in the workplace and the company's offering benefits and support to those who need it most. This episode was produced by Employee Benefit News with audio production by Kelly Malone. Special thanks this week to Duffy Collins from Northwestern Mutual, Olivia Stover from Next PR and Dina Caggiula from Vanguard. Rate us and review us wherever you get your podcasts. And check out more content from the EBN team at www.benefitnews.com.