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trendspotting | PLANADVISER November/December 2016

Key Elements of Financial Wellness

People want information on HSAs and budgeting

By Rebecca Moore editors@assetinternational.com | November/December 2016

An analysis of individuals participating in Fidelity’s financial wellness program finds there are definitely some groups with unique needs, and suggests how plan advisers and sponsors can tailor their programs to address those needs.

Meghan Murphy, Fidelity’s director of thought leadership, in Boston, says approximately 270,000 individuals have completed her firm’s financial wellness checkup, which shows “they want to [talk about] their situation and get ideas for next steps,” she says.

Overall, most people (88%) are insecure about their financial future. More than half lack healthy saving and spending habits or behaviors, and only about one-third (38%) have more than three months’ salary in an emergency fund. The top three topics they are interested in are health savings accounts (HSAs), simple rules for saving and spending, and saving for an emergency fund.

One group Fidelity spotlighted was what it calls “Unconfident Millennials.” Most of these individuals (89%) lack confidence in or are afraid to trust their current financial picture. About one-quarter (22%) are do-it-yourselfers, but they admit they are unsure about their investing and money managing skills. Despite this group having the longest time horizon, more than one-quarter (28%) fail to invest in the markets.

Murphy adds that most Millennials said they are either stressed financially or just “OK.” Forty-two percent have little or no emergency savings. “Emergency savings is something on which plan sponsors can focus,” she says. “If individuals don’t have that, credit card debt increases, they are less likely to save, and financial confidence decreases.”

Fidelity also found that single mothers need the most help. Most (97%) feel insecure about their financial situation. More than half (60%) have little or no emergency savings, and 67% have credit card debt. About one-quarter (27%) spend more than they earn, while half (49%) break even each month.

“Single moms have so many competing financial priorities—their child’s next field trip or a sport their child wants to play,” Murphy notes. “Seventy-six percent said they are either living paycheck to paycheck or spending more than they earn.”

She adds that women in general tend not to talk about money, so employers need to get them engaged by discussing strategies. “Budgeting is a key pillar of a financial wellness program,” Murphy says. “Fidelity has a rule of thumb: Spend 50% of pay on essentials, 15% for retirement—or at least work toward that, then save 5% for short-term expenses.”