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Getting Generation Y interested in superannuation and savings

23 September 2009

Source: Mike Toten, WorkplaceInfo

Younger employees face many demands on their pay packets; for example, graduates who have to pay off their higher education fees and employees trying to finance the purchase of homes, new cars, etc. But saving money is important, too, and in Australia superannuation contributions by employers are compulsory. What can you do to promote the value of superannuation and saving plans to these employees?

Why bother?

There is already some evidence that many employees have failed to make adequate provision of funds for their retirement which may, when the time comes, force them to stay in the workforce for longer than they might wish. Given population demographics that project the percentage of people who will need to live on retirement benefits will steadily increase over at least the next two to three decades, this has implications for savings in general.
But for employees now in their 20s, this all seems a long way off, too far away to worry about now. Many new graduates face the burden of thousands of dollars of higher education fees to pay off. They and other employees have the novelty of full-time salaries for the first time in their lives, but there are many pressures to spend money on major purchases that are affordable for the first time. So short-term gratification often takes precedence over long-term security.
Retirement saving may be falling down the priority list of many people, but it remains one of the most efficient and cost-effective ways to save.
The challenge for employers, and for HR, is to convince young employees of the benefits of retirement savings and to encourage them to develop positive attitudes towards saving. Note thatthey must do this during what is currently a very ‘challenging’ economic climate.

Tips for encouraging saving

In a recent article on the British Personnel Today website, Gill Wadsworth offers the following tips to encourage younger employees to save:
  • Ensure employees are aware of the employer’s commitment to superannuation, the level of contributions provided and any available tax breaks. Ensure they have ready access to information and a source that will answer their questions.
  • Avoid using terms such as ‘retirement’ and ‘old age’. Use words that appeal to younger employees, such as ‘markets’, ‘money’ and ‘savings’, and use media such as emails, text messages and interactive websites.
  • Be careful not to provide financial advice yourself. Instead, provide access to professional financial advisers as an employee benefit.
  • Offer other benefits that may appeal more to younger employees, such as assistance with repaying student debt, or saving for a deposit on a home. Look at possible ways that superannuation contributions may be used to assist such short-term goals without affecting long-term benefits if possible. For example, it may be possible to fund student debt from payroll deductions, then after the debt is paid the employer can shift the payments into a deposit account to help build enough funds for a property deposit.
  • Note that not being able to access their money until the age of say 55 is a big issue for some young people. Look at providing assistance with ‘nest egg’ types of savings accounts where an accrued amount can be rolled over into superannuation later on. This is another area where the access to professional financial advice will help.
  • Use any promotional material and information provided by the superannuation fund.
  • Use computer models to demonstrate a superannuation fund’s potential growth and the early investment needed to achieve that result.
  • Provide access (eg by allowing on-site visits) to organisations such as credit unions.
  • Aim to educate young employees, rather than talk down to them. They need to feel empowered and in control of their investments.
  • Given that most superannuation funds and accounts have lost value since the economic downturn commenced in 2008, emphasise the long-term prospects and benefits of superannuation. Models can show how long it takes funds to recover from downturns and how they compare with other types of investments.
  • Integration of benefits has been found to work better than a ‘silo’ approach. Link superannuation information with information about other employment benefits that more obviously appeal to younger employees.
Summary
To encourage a positive attitude towards saving and an appreciation of the benefits of superannuation, you need to tailor the messages to the employee demographic group, and try to address both short-term and long-term needs.
Reference
Gill Wadsworth, ‘Encouraging the savings habit in younger employees’, published on Personnel Today website, click on Features), 29 September 2009. Accessed 26 October 2009.

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