Saving, Investing, Budgeting: How Plan Design Can Help Entry-Level Employees Thrive

This is the third and final article in a series dedicated to the benefits of designing your workplace financial wellness, retirement solutions and equity compensation based on where employees are in their lives and careers. This piece focuses on considerations for employers regarding they can address the unique financial needs of your entry-level employees.

Financial stress finds employees across the income spectrum. An executive may be trying to balance their portfolio; a middle manager may be crunching numbers to try to keep saving while making a house payment and preparing to put a child through college; and an entry-level team member may be trying to save money for the first time and feeling like their student debt repayments are cramping their style and their newly activated spending power.

Rather than taking these different stressors into account, however, companies often take an umbrella approach to financial wellness, retirement planning and equity compensation. “Your company needs a provider who can speak to each level of employee,” says Tom Conlon, Head of Retirement Sales, Morgan Stanley at Work. “For employees just starting out, the conversation can be about how to take advantage of the company match for retirement savings. For middle managers, it might be about the difference between pre-tax contributions to their workplace qualified retirement plan and Roth IRAs, and what the best way for these employees to max out their annual contribution limits to these retirement vehicles. And for executives, there should be a discussion about how to maximize deferred compensation programs and understand how the taxation of such programs work.”

To encourage and fully support these different conversations, it can be helpful to think more strategically about financial benefits and take a tailored approach to employees’ financial wellness. Organizations often miss the opportunity to design workplace financial wellness, retirement solutions and equity compensation plans that truly engage their different segments of employees.

This matters because many employers are in a battle for top talent. Those who can offer a complete package of financial benefits that are carefully customized, vetted and curated for what their employees’ needs may gain a major competitive advantage. “How wonderful to be able to tell all of your employees: This onsite seminar and this virtual financial advisor have been tailored specifically for you. We understand the areas where you have questions or need guidance, and we want to help you make the most of your benefits,” says Dee Crosby, Executive Director, Learning & Development, Morgan Stanley at Work.

Being able to offer help to employees at every level, from those just entering the workforce to veteran executives, may show them that you will be with them each step of the way. Starting these important financial conversations early is key to empowering the next generation of employees.

Financial Challenges and Opportunities

Employees who are early in their career are more likely than previous generations to have a large amount of student loan debt, ¹ which may create anxiety around their ability to meet their financial needs. According to a 2022 CNBC/Momentive poll of over 5,000 Americans,² among those with student loans, more than half (54%) said that the downside of taking on debt outweighed its benefits. An even higher percentage (81%) said they’ve had to delay key life milestones (such as buying a home or saving for retirement) to pay off their loans. And a full 62% say their student loans negatively affect their mental health.

These employees realize they need to pay down their debt, but they also want to save for milestones like marriage or buying a home. While they may have heard about the importance of saving for retirement, younger generations in the workforce may be living paycheck-to-paycheck and trying to budget for the first time. Saving for an event 40 or more years away may seem like a low priority for these employees—especially since many prefer to spend money on things that deliver more immediate rewards.³

Consider, too, that many employees lack high degrees of financial literacy—a situation that can be remedied if employees receive more robust financial education earlier in their careers. According to a 2021 survey conducted by the Teachers Insurance and Annuity Association (TIAA) and the Global Financial Literacy Excellence Center (GFLEC), less than 50% of respondents aged 18 to 39 were able to correctly answer basic financial literacy questions about earning, consuming, saving, investing, borrowing, insuring and financial risk.⁴ “There’s a huge gap in the curriculum in high school and college,” Conlon says. “It’s likely that no one has taught these younger employees how to budget, how to save to meet specific goals, or how to appropriately manage debt."

Financial Benefits That Focus on Incentives, Education and Habit-Building

While entry-level employees may face financial challenges, they are also eager to learn more about financial wellness. This means employers have an opportunity to teach, incentivize and help them lock in good financial habits they can build upon for the rest of their careers and into retirement.

Working with a benefits provider who can offer uniquely segmented approaches across retirement solutions, financial wellness and equity compensation plans can mean more educated and knowledgeable junior team members. It also creates a robust, flexible benefits program that may help both your organization and your employees thrive.

Morgan Stanley at Work meets companies and individuals wherever they are on their journey of wealth creation. With an end-to-end approach to workplace financial solutions, we provide a unique combination of thoughtful education, insightful advice and leading technology.