Automated cash flow management app can aid retirement planning

Commentary: A plethora of articles across all mediums attests to Americans’ lack of retirement savings. Articles about Americans’ lack of financial health and the impacts of the resulting stress have become nearly as prevalent.

Of 5,896 respondents polled for the Federal Reserve System’s Report on the Economic Well-Being of U.S. Households in 2014, approximately 47% reported that they wouldn’t be able to cover an emergency $400 expense without selling something or borrowing money. This result, according to the authors, shows many Americans are “ill-prepared for a financial disruption.”

The Executive Summary of Financial Finesse’s 2015 Financial Stress Report opens with this: “In 2014, a sizeable number of employees continued to experience “high” or “overwhelming” levels of financial stress, with 23% reporting significant financial stress in both 2014 and 2013. This is compared with 18% in 2012 and 19% in 2011. Additionally, the summary notes that, according to the 2015 Stress in Americastudy commissioned by the American Psychological Association, stress about money and finances is prevalent nationwide; 85% of employees report at least some level of financial stress.

Household finances cause more stress than personal health or work issues, according to the results of a recent LIMRA study—Financial Triage: Assessing Financial Wellness. Nearly half (42%) of respondents reported that household finances cause “somewhat high” or “very high” stress levels compared with other areas of their lives. Personal health or work issues were considered the second highest source of stress (29%).

A look at the LIMRA study’s respondents’ financial situation helps explain the high levels of stress. The study reveals that:

• 42% have no rainy-day savings;
• Only 18% are debt-free; and
• While 60% of non-retirees are saving for retirement, only 32% have a long-term financial plan

On the positive side: 8 out of 10 respondents have an interest in at least one area of financial education, with half seeking help with general budgeting. 

Jennifer Douglas, associate research director, development research at LIMRA, is reported as commenting that "consumers with the highest stress levels are looking for basic financial education like budgeting, reducing debt and understanding employee benefits.”

Clearly, the results of these various surveys attest to employees’ need for help managing daily household finances.

The results of Aon Hewitt’s 2015 Hot Topics in Retirement survey of nearly 250 employers representing 6 million employees reveals that:

• 93% of respondent employers are very or moderately likely to create or broaden their efforts on financial wellness topics in a manner that extends beyond retirement decisions.
• Half of all companies believe the significance of financial wellness concepts has increased over the last two years.

Increasingly, employers are expanding wellness programs to include financial guidance with the goal of improving their employees’ financial wellness. According to a recent article in The Wall Street Journal, companies including Staples, PepsiCo and Meredith Co. have begun offering programs to improve their workers’ financial wellness. Typically, these financial wellness programs include finance classes, counseling sessions and even videogames designed to help employees pay down debt, stick to a budget and invest for their retirement.

While we’re heartened to see employers turning their focus to their employees’ current cash management issues, educational and rewards programs — while helpful — are clearly not enough. Beyond financial education and assistance with budgeting, employees need tools that take the stress out of managing their daily finances.

We’re working daily with employers who see the benefit of tools that automate short-term cash flow management and savings. The low level of employee engagement in these programs, as shared by a large technology products company, speaks volumes about the limitations of education, guidance and help with budgeting: an offering of a free personalized financial guidance service was being used by less than 2% of the company’s total employee population. Another employer — a 100k+ employee company — shared this: “Employees don't want to talk about it [money] and don't want you to tell them what to do; they want you to do the work for them.”

Employees lead busy lives, juggling multiple work and family priorities. They need tools that make managing their daily finances and saving easier. Just as retirement plan participation is enabled and boosted with technology-enabled auto enrollment, we think using technology — an app — to automate personal finance best practices is key to helping employees manage their cash flow and achieve financial wellness. Apps that automate tasks are ubiquitous and popular among all demographics, and they don’t require behavior change that’s proven difficult to maintain. An actionable, device-agnostic solution that does the work for employees requires a minimum amount of input from them and enables them to focus on the more pressing demands of their work and families.

Brian is Cofounder and CEO of DoubleNet Pay, a financial wellness app that fully integrates with employer payroll providers to automatically pay employees’ bills and fund savings goals in line with employee paycheck cycles.