Presented by

E. Thomas Garman, Aimee Prawitz, Jinhee Kim, Barbara O’Neill, Jamie Richter

Presented to Association for Financial Counseling and Planning Education November 18, 2009

“Using a Return-on-Investment Model to Promote Financial Education in the Workplace”

©Personal Finance Employee Education Foundation, 2009

Introduction Judith N. Cohart, PFEEF President, January 1, 2010 Using the PFW questions PFEEF Resources and Website PFEEF’s Return-on-Investment (ROI) efforts ROI Logic and online calculator Use PFFEF Expertise and Metrics to Project ROI for

Employers Pencil/Paper and Online Data Collection Business Case for Workplace Financial Programs Tips on Working with Employers

Agenda for Today

AFCPE, President (1986, 1991) AARP Foundation National Coalition for Consumer

Education USA TODAY U.S. Congress Legislative Assistant District of Columbia Bar

Judith N. Cohart, PresidentPFEEF (January 1, 2010)

The PFW assesses financial healthThe 8-question self-report PFW questions

subjectively measure a multi-dimensional construct of financial distress/financial well-being by assessing some combination of the variables of financial well-being, financial distress, financial strain, and financial satisfaction

The PFW measures the single construct of financial distress/financial well-being

Using the Personal FinancialWellness (PFW Questions

PFW Validity and Reliability

Validity and reliability are enhanced by administration to multiple nationally representative samples of adults as well as multiple samples of financially distressed consumers; review of research; surveys of experts; attention to clarity, readability, appearance, and question sequencing

A reliability statistic is one indicator of the effectiveness of an instrument, and the Cronbach Alpha reliability statistic for the PFW is a very high 0.956

PFW© (Q 1-4)(No Scaling or Anchor Terms Shown on This Slide)

1. What do you feel is the level of your financial stress today?2. How satisfied are you with your present financial situation?3. How do you feel about your current financial condition?4. How often do you worry about being able to meet normal monthly living expenses?

PFW© (Q 5-8)(No Scaling or Anchor Terms Shown on This Slide)

5. How confident are you that you could find the money to pay for a financial emergency that costs about $1,000?6. How often does this happen to you? You want to go out to eat, go to a movie or do something else and don’t go because you can’t afford to?7. How frequently do you find yourself just getting by financially and living paycheck to paycheck?8. How stressed do you feel about your personal finances in general?

Source: InCharge Education Foundation, National Norms on InCharge Financial Distress/Well-Being Scale for General Adult Population. 1 Means “Overwhelming Financial Distress/Worst Financial Well-Being”; 10 Means “No Financial Distress/Excellent Financial Well-Being” ©Copyright by Personal Finance Employee Education Foundation and InCharge Education Foundation, 2004-2009 All rights reserved.

(PFW Mean=5.7; SD=2.4)

1 2 3 4 5 6 7 8 9 1 0

5.46.9

8.2

9.2

14.5 14.2 13.8

12.2 11.4

4.2

0 .0

2 .0

4 .0

6 .0

8 .0

10 .0

12 .0

14 .0

16 .0

Per

cen

tag

e

(1-4: 30%)High distress (5-6: 28%)

(7-10: 42%)Low distress

National Norms on PFW©

How to Use the PFW

1. Benchmark employee financial well-being (in 3 to 4 minutes)

2. Prove a financial program works3. Project the employer’s return on

investment (ROI) for providing employees easy access to quality financial programs

4. Prove the employer’s return on investment (ROI)

PFW 150+ Users

1. Financial Organizations (77)2. Universities (39)3. Companies (26)4. Military (5)5. Government Agencies (1)6. Medical (1)

Using the PFFW

Use of the IFDFW is free with written permission. Take 3 minutes to fill out and submit “Permission Form” on the website of the

Personal FinanceEmployee Education Foundation

www.PersonalFinanceFoundation.org

Provides employers no-cost-to-use tools and expertise to detail the bottom-line benefits of quality financial programs

Promotes “PFEEF’s Best Providers” whose quality workplace financial programs genuinely improve employees’ personal financial behaviors and increase employer profits

Encourages other providers to bring their programs up to proper standards

PFEEF’s Resources and Website

PFEEF is a 501(c)3 nonprofit charitable foundation

PFEEF Resources and Website

PFW Questions Research Two videos PowerPoint presentation Employer’s ROI PP presentation Marketing messages to employers Ezine newsletter

Personal Finances:• Financial well-being• Financial satisfaction• Financial distress• Financial stressor events• Financial behaviors• Credit card debt• Credit card delinquencies

Job Outcomes:• Work satisfaction• Pay satisfaction• Absenteeism• Presenteeism (cutting down

on normal activities)• Personal financial matters

interfering with work• Work time used to

handle personal finances• Health

Employer Costs: PFEEF Research Proves ALL These Factors are Correlated in the Ways Expected

Employers Often Recognize These Issues…

But Do Nothing.Employers Often Recognize These Issues…

But Do Nothing.

“You can lead a horse to water, but you can’t make it drink”

Employee Financial Illiteracy is an Employer Problem

“Employers do not realize they can improve profits

–and prove it–

by helping employees improve personal financial behaviors”

Quality Financial Programs Result in Improved Employer Profits

Quality Workplace Financial Programs Rescue Employees and Employers byQuality Workplace Financial Programs Rescue Employees and Employers by

Quality Financial Programs Result in Improved Employee Personal Finances and Employer’s Bottom Line

1. Decreasing employee personal financial distress

2. Increasing employee personal financial wellness

PFEEF’s Approach to Projecting Return on Investment

• Benchmark employee financial health (employees complete PFW)

• Determine key job outcomes of financial program (PFEEF and employer together)

• Assign values to each key job outcome

• Calculate projected benefits of financial program

• Identify program cost and calculate ROI

PFEEF Projects 1-Year Changesin 10 Variables

1. Less work-time wasted on personal finances

2. Less absenteeism3. Reduced turnover4. Improvements in job performance5. Lower health care costs6. Health care premium savings7. Employer’s FICA savings - health care

spending plan8. Employer’s FICA savings - dependent care

spending plan9. Fewer workers’ compensation claims10.Fewer garnishments

PFEEF Could Project Additional Variables as Part of Employer’s ROI

Additional factors that could be included in the PFEEF project ROI calculation that may contribute to increasing benefits over the costs are:

1. fewer payroll advances2. fewer loans from 401(k) plans3. fewer accidents4. less workplace violence5. less substance abuse6. fewer thefts7. increase in job engagement8. improved morale9. increased participation in 401(k) plan10. reduced human resource department costs11. reduced 401(k) plan fiduciary liability

PFEEF Assumptions Behind Employer Costs and Projected Improvements

• Employer cost assumptions are based on industry data and employer’s HR professionals

• Projected improvements in personal financial behaviors are– based on research– reasonable and conservative– for one year following participation in a quality

financial program

PFEEF Projected Benefit of Improved Job Outcomes for ABC

Company (5,000 employees)

Program impacts 30% of employees (1,500) with varying effectiveness and improvement in job outcomes:

Work-time wasted on personal financesAbsenteeismTurnoverJob performanceHealth care costsHealth care premium savingsHealth care spending planDependent care spending planWorkers’ compensation claimsGarnishmentsTotal benefit of improved job outcomes

$ 412,3

35115,505720,000

1,253,000148,50010,00068,85091,80075,00033,750

$ 2,928,735

PFEEF Projected ROI Ratio of 3.04:1for ABC Company (5,000 employees)

• Benefit of improved job outcomes = $2,928,735• Cost of financial education program =

$725,000($145/employee)

Benefits – Cost

Cost x 100 = ROI

$2,928,735 - $725,000

$725,000 x 100 = 304%

Translation: There will be $3.04 return on investment (ROI) in net benefits for every dollar invested in the financial program

How to Use PFEEF Expertise andMetrics to Project ROI

• Collect data using paper and pencil, and send to PFEEF

• Collected data using PFEEF’s online system

• Or use both

Five Ways to Use PFEEFMetrics and Expertise

1. Utilize the online PFEEF ROI Calculator so employers can get an ROI estimate based on good generic assumptions and calculations and obtain a report of those findings

2. Help an employer collect data and analyze it yourself3. Ask PFEEF to help benchmark the financial wellness of an

employer's employees, and data collection takes about 7 minutes (includes concise report 

4. Ask PFEEF to work with an employer’s PFW scores and cost data to prepare a comprehensive employer-specific return-on-investment report 

5. One year later PFEEF can prove the genuine ROI using employer data

The Business Case for QualityWorkplace Financial Programs

1. Legal – “insurance” against litigation (ERISA and SOX liability and CFO nightmare)

2. Bottom-line benefits – better productivity and retention

3. Human resources – attract, retain, reward, motivate the right employees

4. Benefits – facilitates benefit plan changes and behavioral changes

5. Culture – links the program to the values the company wants to instill in employees

6. Social/Moral – it is right thing to do as stewards of employee well-being

*Delivering Financial Literacy Instruction to Adults, Garman & Gappinger, 2008, taken from Ernst & Young’s Bill Arnone’s comments on pages 31-35 (Heartland Institute of Financial Education [303-597-0197])

Tips For Working With Employer’s Financial Education

Programs

Barbara O’Neill, Ph.D., CFP®

Extension Specialist in Financial Resource Management

Rutgers Cooperative Extension

Working With Employers

• Framing improved practices of program participants in economic terms will help improve accountability to employers

• Can have high dollar impacts even with conservative assumptions for program participation, number of evaluation responses, and number of respondents who report changed behavior

• The key is to have common impact indicators and to aggregate data.

Working With Employers: Calculating Economic Impacts of Programs

What to Do in Employee Presentations

• Find out demographics of the audience• Request employee benefit documents

– Summary Plan Description for pension– Employee benefits manual

• Provide written handouts• Come early and meet the audience• Always use examples with modest incomes• Comment favorably of quality employee benefit plans• Tell success stories and describe role models

What NOT to Doin Employee Presentations

• Use acronyms without explaining them

• Use statistics instead of dollar amounts

• Use text-heavy PowerPoint slides

• Straight lecture instead of facilitated discussion

• Miss opportunities to prompt immediate action (e.g., signing up for 401(K) plan)

• Miss opportunities to conduct follow-up evaluations, including ROI analysis

It is in the employer’s best interest—more profits—to provide employees easy access to quality financial programs

PFEEF Conclusion about Employee Financial Literacy and Employer Profits

“It also is the right thing to do as stewards of employee well-being!”

“It also is the right thing to do as stewards of employee well-being!”

Thanks!

InformationDr. E. Thomas Garman, President, Personal Finance Employee Education Foundation, Professor Emeritus and Fellow, Virginia Tech University

9402 SE 174th Loop, Summerfield, FL 34491 USATele/Fax: 352-347-1345; E-mail: info@pfeef or ethomasgarman@yahoo.comWeb: www.PersonalFinanceFoundation.org

For free permission to use the PFW scale, fill out online form

To examine the PFW scale and research articles about its use, see http://www.afcpe.org/pages/journal_abstract.cfm?journal_id=290&top_id=21 http://www.afcpe.org/pages/journal_abstract.cfm?journal_id=303&top_id=21

Book available: Delivering Financial Literacy Instruction to Adults (2008), Garman & Gappinger, Heartland Institute of Financial Education (303-597-0197)