Anyone can save with the right incentive, opportunity and information
Do you want to save more money? Are you a saver or a spender? Did you know that anyone can save more? People need to save more and studies show that it’s possible with a little incentive.
Most people would agree with the generalization that the more income you have, the easier it is to save money. A recent study published in the Globe and Mail shows something a little different.
Low income earners were given an incentive to save. For every dollar they saved, they would get $3 in virtual credits for training, education, or starting a business. The results of the study are interesting. Even people with low incomes and low financial assets can save money when given the right opportunity, the right education and some incentive to do so.
Group Retirement Plans are keys to future success
Employers who implement group retirement plans (either pensions or group RRSPs) should be acknowledged for their contribution to the financial security of their employees. The best plans are the ones that not only give employees the opportunity to forced savings but also the education and the incentive to participate.
Opportunity is created simply by implementing a Group pension plan or group RRSP. Helping employees create forced savings through payroll deduction is teaching them one of the key habits of financial success – pay yourself first. In my 20 years in the financial industry, I’ve seen worked with successful retirees who consider their group retirement plan their key to success.
Incentive is created through matching programs. I always tell employees they should maximize contributions anytime the employer offer to match employee contributions. We should also praise employers who continuously increase matching for key employees or long tenure employees. On the flip side, it is also helpful to employees by creating a disincentive to withdraw funds from their employer sponsored retirement plans.
Education is the third key to helping employees achieve financial success. Giving people the opportunity and incentive is great but without good financial education and information, people’s actions can be misguided. Unfortunately, I think most plans fall short of providing good financial education. Most of the education happens from the plan sponsor reps who come in and teach employees about the plan and the product. Plan and product education is good but employees need more to become financially successful. They need to engage in their affairs and know how their group retirement plan fits into their bigger picture.
Employers who implement group retirement plans need to ensure that their plans offer opportunity, incentive and information. Plans that miss out on any of these factors can still be successful but plans that incorporate all three will turn mediocre plans into exceptional plans.