Financial Education for Employees: Federal
|The majority of company savings and retirement programs are employee-directed contribution plans. Employees must elect to participate in the plans, then independently manage and invest their funds among options offering varying degrees of risk. Employee-directed plans increase an employee's responsibility to become a knowledgeable investor as decisions can have lifetime consequences—especially for those who don't participate. A survey cited in the November 2002 Federal Reserve Bulletin article, "Financial Literacy: An Overview of Practice, Research and Policy," indicates that as many as 30 percent of eligible employees do not participate in their employer retirement plans despite benefits such as employer matching components offered by some companies. Recognizing employee education is an important focus for financial education efforts, the Federal Reserve turned its attention inward in 2002, bringing a new financial education program to employees.
During 2002 the Federal Reserve offered a retirement planning seminar for employees age 50 and older, the first in a series of personal financial planning seminars the Fed intends to offer its employees. San Francisco Reserve Bank President Robert T. Parry attended the seminar to view firsthand the quality of the program.
Parry is a strong supporter of financial education efforts within the System. From his vantage point as an economist and monetary policymaker, Parry says the Fed's renewed emphasis on employee education is particularly important in light of the complexities of the financial marketplace and responsibilities employees have to direct their financial futures.
When asked what messages he would convey to employees about the importance of financial education, Parry says, "the first is to start early in their careers at the Fed, take advantage of the Bank's 401(k) program, the financial education workshops, and get additional help if needed." He adds that there are many instances where a good understanding of financial matters is invaluable: buying items on credit, financing a mortgage, investing, budgeting. All of these decisions have a better chance of success when employees are financially educated says Parry. He emphasizes these are messages that apply to all consumers because the economy will continue to change and grow more complex. "This requires employees and consumers to make long-term commitments to learning about financial issues for their personal well-being." Parry says ultimately this personal commitment translates to national well-being and a more productive economy.
Salt Lake City Branch employee Chris Matsen was another participant in the Fed's inaugural financial education seminar. Matsen joined the seminar via a Web conference. "I wanted to increase my knowledge of the benefits that will be available to me as a retiree." Matsen and other Federal Reserve employees supplement knowledge gained at the seminars with another valuable financial tool for Federal Reserve employees: a benefits Web site that helps employees plan for retirement and other financial goals. A frequently used feature of the site allows employees to input various financial and timeframe criteria for their retirement and other goals to model the financial implications of their choices. A quarterly personal finance newsletter for employees augments the Web site.
Based on the success of the initial seminar, the Federal Reserve is developing financial planning seminars for all employees to assist them in reaching their goals at various stages in their lives. "These programs are intended to help employees establish and achieve financial goals such as saving for a child's education, building an emergency fund, investing wisely, and retirement planning," says Todd Glissman, group vice president of District Human Resources. The seminars also will help employees understand tax implications, insurance options, and lifetime planning issues such as wills and trusts.
Glissman says the workplace is a logical venue for financial education. "Given
that employees have more responsibility for planning their financial
futures and have very busy lives, we believe it's important to make sure
they have the information and tools necessary to make sound decisions."