Was this too brutal?
This summer, one of my teenage kids went on a bit of a spending spree. She committed to a string of events with her friends, including festivals and overseas trips.
Then she asked to borrow £200 from me, to be repaid “when I get the cash”.
I told her that she could have the money, but would stop her allowance for the next four months as a form of repayment.
Because she was dependent on her allowance, she decided to pass – and within 3 days had found a job in a pub instead…
My friends all told me I was being too harsh. They thought I should have helped her enjoy her summer – or perhaps set softer repayment terms.
But I had good reason for my tough love -- and there is a lesson for every HR professional dealing with company pensions.
You see, I know that within a year or two, my teenage daughter will be heading for university – and for the very first time, she will have to manage a large-ish budget.
The financial decisions will come thick and fast: Can she afford these student digs? If she splashes on going out one week, can she afford to go out again the next week? Can she really afford that taxi home on a Friday night?
It is unreasonable to expect students to be able to plan their spending if they’ve never been financially accountable before.
As a parent, I believe it is my job to take my children on a financial journey well before they hit university.
We need to build their awareness around the value of money and the need to plan ahead. They need help understanding what a budget is…. What happens if you don’t budget…. And how to budget…. if they’re going to cope once they’ve flown the nest.
This can take years to inculcate, which is why I was so strict over the summer.
But while there are very clear differences between our responsibilities to our children and to our staff, for HR and benefits directors, there is a lesson here, too.
Financial planning is not a skill anyone picks up overnight.
We expect our employees to save for their pensions as soon as they join the workforce, but coming out of university, they’ve only just mastered how to spend sensibly (perhaps!).
Savings is another ballgame entirely.
If they don’t understand what life will be in retirement with very little money…
…and no one’s ever spoken to them about why they need to save for retirement, how much to save, or their different saving options….
…then how are they expected to make sensible decisions around their pensions straight away?
Years later, they may still be in the dark.
So, if we want our employees to put more money into their pension pot, it’s not enough to simply repeat, ad nauseam, that they need to save more.
It’s our responsibility to take them through a journey of financial education around this subject.
This isn’t about tough love – there are no penalties involved! – but about dialogue, education and engagement.
Here are Punter Southall Aspire, we’ve worked out exactly what you need to say to your employees at every stage of this journey to get them to start thinking about their pensions, and then take action and start saving more.
We call it our 5-Step Model – perhaps you’ve heard me refer to it before.
Over the next few weeks, I’m going to walk you through it step-by-step. And I’m also going to show you something entirely new: Pieces of collateral we’ve developed, which are ready to send directly to your staff, to engage them at every stage.
Watch out for those blogs!