Better Financial Habits Now, Stronger Savings Later
Try as one might, retirement can’t be put in a bucket by itself. When day-to-day finances are in control, confidence about reaching retirement goals often follows.
That said, those that practice healthy financial habits today are more apt to meet their savings goals tomorrow. So what are some good current financial habits that can lead to better end results?
Creating and Keeping a Formal Budget
Do you keep a budget?
Let’s start with creating and keeping a budget. According to our survey, 4 out of 5 employees maintain some type of budget
With 36% saying they keep a formal budget they regularly track.
Budget-keepers see the value of the tool. Those who maintain a budget overwhelmingly say it increases their financial confidence, it ensures they don’t spend money on unneeded items, and it allows them to save more than they thought.
Among those with a formal budget:
say it increases their financial confidence
say it helps ensure they don't spend money on things they don't need
say it allows them to save more than they originally thought
That confidence translates into how much they save.
The presence of a formal budget is a significant factor in creating strong savings behaviors.
Those with a formal budget tend to save significantly more and see themselves as better savers than those without a budget.
of those with a formal budget save 8% or more
of those without a budget at all save 8% or more.
of those with a formal budget see themselves as good or very good savers.
of those without a budget see themselves as good or very good savers.
Taking the “free money”: Using the 401(k) match
Another habit that builds strong financial habits is even easier than creating a budget: leveraging a company’s 401(k) match program. Taking advantage of the free matching money offered through a 401(k) is a great way to save towards retirement. The good news is that many employees are already taking advantage of this, with 56% contributing at or above their company’s match level.
That said, there is still a high number not taking advantage, as 31% say they don’t use their company’s 401(k) offering at all.
401(k) Match Status
Why don’t employees use their company’s 401(k)? The biggest factors center on income and education. Those who make the least and have the least education are less likely to use their company’s 401(k).
51% of employees who make less than $50,000 do not use their company's 401(k) offering
Percentage of employees by income who do not use their company's 401(k) offering
Percentage of employees by education level who do not use their company's 401(k) offering
44% of employees with a high school degree do not use their company's 401(k) offering
These findings are a good reminder for employers to educate their employees on the benefits of their 401(k) program, specifically using the matching funds.