How Financial Wellness is Replacing Wealth for Millennials
The future might not include hoverbikes or intergalactic travel (then again, it might), but the future will almost certainly include you. However, it’s hard to feel optimistic about your future if your finances aren’t currently in as good of shape as you’d like—if you’re living paycheck to paycheck, if you’re unsure where your health insurance will come from if you lose a job, or if you’re struggling to pay off debt.
But if you can get above water and peek at your financial future, you’ll hopefully see the trends I see, which are shifting the tide in what financial wellness means, how financial wellness will be delivered, and why there’s good reason to keep on treading.
The notion of “financial wellness” will replace “wealth” as a metric of good living
The goal of financial wellness isn’t to amass valuable assets, but rather to take advantage of your finances in a way that helps you live a life full of value. Historically, we’ve approached personal finance as something peripheral to individual wellbeing. But we’re beginning to see financial wellness become a core element of overall wellness, alongside community and physiological health.
In the future, we’ll see this view become widespread and actually shape financial products. Today, you buy investment products, retirement products, insurance products, annuities; you start a college fund for your kid. What if we combined all of these into personalized holistic “wellness” solutions?
This isn’t some distant reality. Already, intelligent technologies are helping scale financial products to serve millions of individuals in a way that is both personalized and cost-effective. That technology can give an individual of modest means comprehensive financial opportunities that wouldn’t have previously been affordable to them. It also allows us to really personalize the experience for an individual so that when we’re guiding them, the tools and resources are relevant for them, ultimately motivating action in a much more meaningful way.
Gen Xers and Millennials are getting discouraged about retirement, but there’s reason for them to be optimistic
Generation X and Y are going to live decades longer than previous generations, but they also face different and acute challenges that previous generations didn’t. Generation X will be the first generation to retire with many, many individuals that don’t have traditional pension plans. Meanwhile, Millennials are starting to save more, but their experience with the financial crisis has hardened them into conservative investors, which could pose a challenge for their ability to fund long-term financial needs.
The big question for both generations is how they’ll make extra preparations for retirement. The downside of living longer is that retirement gets harder to plan for—we don’t know what type of expenses we’ll face or how long we’ll be able to work. But there’s actually a lot we can do to chip away at that uncertainty: by saving earlier, by maximizing 401(k) matching contributions from employers, by hedging against market volatility with lifetime income solutions. Financial wellness considerations should also inform big decisions young adults face: where to live, what type of graduate school to attend, when to start a family.
The upside is that Gen Xers and Millennials will be, on average, a lot healthier when they retire than pre-Boomer generations. They’ll be active for longer. They can travel. These are unique years that, frankly, prior generations generally didn’t get to experience in the same way.
Moreover, Millennials in their 20s are investing for a retirement that might go all the way into their 90s. That gives me confidence that Millennials have a bright future in front of them. Look at our historical track record. Look at how our economy has grown over decades and decades. Millennials will experience so many changes in 70 years. If they start paying attention, they can take advantage of financial opportunities as economic trends shift.
As public social safety nets become less reliable, the private sector is going to play a bigger role in collective financial wellness
The announcement of a major corporate-led healthcare partnership is a sign that employers are recognizing that they have to be a big part of their employees’ health. There are a few reasons employers are equally well positioned to help Americans improve their financial wellness.
First, for many households, the core financial products that they need are found at the worksite already—whether that’s a retirement plan, insurance protection, or even products to help you manage your healthcare costs through something like a health savings account.
Second, it’s hard to reach consumers today. They’re on many different digital and non-digital platforms. However, employers have a precious commodity: their employees’ attention. They actually can engage them. Survey data demonstrates that employees already trust their employers as a source of wellness support.
The increasing involvement of companies in their employees’ financial wellness is not just good for employees, but also for the company’s productivity, which can be hindered by financial stress. Employers should ask themselves what services and support they can provide, whether it be specific solutions—access to counseling resources or educational resources—or expansion of the existing benefits offered broadly.
In order to attract and retain talent, employers will need to think much more strategically about how they’re promoting financial wellness
As individuals, when we look at an employer, we think about career opportunity, compensation, benefits. Increasingly, individuals will consider how well a potential employer can help holistically on financial wellness. To this end, individuals are likely to ask potential employers whether their offered benefits are comprehensive enough to address current and future financial needs. This could also include an expectation that employers help employees know how to optimally take advantage of these (or external) benefits by providing financial literacy education and counseling.
As employers embark on building financial wellness and start to look for potential partners to help, there are a few things they could look for. They should look for a provider that can deploy financial programs in a way that takes advantage of existing benefits and also demonstrates ROI. Employers should also look for a holistic provider that can help across a full range of financial wellness needs—from driving engagement, to managing day-to-day finances, to helping their employees achieve long-term goals.
By promoting financial wellness, employers will rise alongside employees, achieving cascading returns and optimal productivity. We call this phenomenon of workplace symbiosis “The Wellness Effect.”
To learn more about The Wellness Effect, follow Prudential’s Chief Financial Wellness Officer @VishalJain on Twitter.
This article was produced on behalf of Prudential by Quartz Creative and not by the Quartz editorial staff.