Saving for retirement is a good financial habit to learn in those early employment years. Many published studies and white papers point to the need for broad-based financial education, targeted to defined populations, and personalized to meet their individual needs. Plan sponsors and defined contribution (401(k)) plan administration providers may need to leverage multiple communication channels to reach diverse audiences.
Influences of Gen X, Millennials & Gen Z
Gen X (born in 1965 – 1980), Millennials (1981 – 1996) and Gen Z (1997+) are influenced differently by the social, economic and world events that occurred during their lifetime, including how they engage online.
Many Millennials entered the workforce at the height of the economic recession, which impacted their employment choices and future earnings. Additionally, they experienced the internet explosion – social media, ongoing connectivity through mobile devices and 24/7 on-demand entertainment.
These Millennials are now employees in their 20s and 30s who can participate in a company’s 401(k) plan and save outside of work. Because this group tends to routinely utilize social media sites, plan sponsors have the opportunity to reach these employees online to influence their saving behaviors. Gen Z appears to be even more tied to the “always on” technological environment.
How Does Social Media Influence Millennials?
Social media offers a vast array of personal finance, money and investing educational materials via podcasts, videos, blogs, and financial planning tools, etc. that individuals leverage to manage their finances including paying down student debt and saving for retirement.
One potential means of helping Millennials to save is to share tips on what people in their income profile are doing to successfully save.
However, social media can also lead to a Millennial’s financial downfall. Based on a study by Allianz Life®, Millennials respond to peer pressure1. About half of this survey’s participants noted a fear of missing out (FOMO) and would spend money that they did not plan because of pressure from social media sites.
The FIRE Movement
Although many Millennials struggle to save, there are those who have saved significant balances seeking financial independence. The FIRE (Financial Independence, Retire Early) movement’s objective is to accumulate assets by simple living and low-cost passive investments until they have accumulated enough money for ongoing living expenses. This model gained significant interest through online communities, blogs, podcasts, and discussion forums. Once the individual reaches their goal, they either can retire or embark on a second career.
5 Ways to Influence Financial Behavior of Millennials
Plan sponsors and defined contribution administrators have new opportunities to assist Millennials to proactively manage their money, including saving for retirement and paying down debt, especially student loans and credit cards.
Here are some methods providers are using today:
- Website Many provider participant websites offer educational videos on various financial topics and budgeting tools.
- Social Media Some providers actively engage with participants on Facebook, Twitter, LinkedIn, Instagram, Snapchat, and YouTube, sharing information and creating conversation. Since technology is continually developing, plan providers need to stay current with changes in the social media sites.
- Plan Design Incentives Plan sponsors can design retirement plans and other benefit programs that influence participant behaviors. With the recent offering of student debt programs, plan sponsors are incenting participants to pay down their debt by making special contributions to their 401(k) plan or making a direct payment toward the employee’s student loan.
- Creative Enrollment Offers Many companies have health and welfare plans that encourage employees to utilize biometric screenings and other health related programs. Creatively designing a program to reward non-savers to enroll in the 401(k) plan may reduce some of the financial stress that they are experiencing.
- Socially Conscious Investment Options Another trend that Millennials are engaged in is environmental, social and governance investing. This may challenge plan sponsors to seek new investment alternatives that address their social concerns.
“Millennials will drive this trend moving forward. As early as 2025, 75% of the workplace could be made up of Millennials, and they are very plugged into this topic.”2 Socially responsible investment options in a plan may encourage greater participation.
As Millennials and the upcoming Gen Z population now comprise most of the workforce, communications may become an interesting challenge but a significant opportunity to impact behavior.
If you have questions about increasing employee engagement in your benefit programs, please reach out to us for assistance.
(1) The Allianz Generations Ahead Study was conducted by Larson Research + Strategy via lone survey in May 2017 with 3,006 U.S. adults ages 20 – 70 with a minimum household income of $30K and was commissioned by Allianz Life.
(2) Plan Sponsor National Conference 2019 panel discussion “DC Investment Ideas, ESG and CITs”.