Perceptions vs reality of personal finance
The majority of employees report they are confident about their financial situation, however, personal finances remains their number one source of stress.
What explains this paradox? While employees say they are confident, their actions and circumstances do not match their perceptions.
Many are not successfully managing their short-term expenses, and therefore, are not on track to reach their long-term financial goals — causing a sense of financial insecurity that leads to stress.
Retirement planning plays a part in this as well. Overall, the average employee plans to retire at age 65, with over 1 in 5 (21%) planning to spend their retirement years travelling. Yet 1 in 4 (22%) are only planning for their savings to last up until 15 years.
This gap between what employees say and the reality of their day-to-day lives highlights the importance of educating employees and providing them with the right resources and tools to assess their true state of financial health.
This way, employers can encourage employees to better manage their finances to prepare for situations that are most likely to cause stress.
This disconnect is particularly noticeable among younger employees, who relative to their older counterparts, have a higher rate of overlap in feeling both in control of their finances and living pay to pay. Male, Gen Y and Gen X are more likely to feel confident in their financial situation, but in Gen Y’s case this is unwarranted as they are also more likely to live pay to pay.
This perception gap inhibits employees from truly understanding their financial situations and taking the appropriate action to plan and save.