The Importance of Financial Planning for Gen Z Benefits

Quick look: Financial planning tops the list of Gen Z benefits as this demographic hopes to secure its future despite economic uncertainties. Fortunately, there are plenty of ways a broker-PEO partnership makes a difference for SMB clients as they figure out the most optimal financial wellness benefits.

 Workforce trends and behaviors are constantly shifting. Even the players are changing positions. In 2023, the number of Gen Z workers exceeded the number of Baby Boomers in the workforce for the first time.

Gen Z includes those who were born between 1997 and 2012 and were impacted by the pandemic and subsequent Great Recession. They are also the first generation to grow up with the internet, so digital solutions are not novel to them; they’re expected.

As of 2024’s second quarter, this demographic made up nearly a fifth of the U.S. workforce. By 2030, it’s projected Gen Z will make up about a third. As Baby Boomers transition out and a younger demographic takes up more space, brokers and small- and medium-sized businesses (SMBs) must prioritize benefits accordingly.

The Standard recently released a report illustrating the importance of building financial literacy for Gen Z employees. While companies may already have financial wellness initiatives in place, the question is: do they align with what their employees currently want?

A review of the data will help to guide brokers on what to do to enhance benefits, and how a partnership with a professional employer organization (PEO) can incorporate them into a recruiting and retention strategy to support overall growth for their SMB clients.

What do Gen Z employees value?

While Gen Z appreciates traditional employee benefits like health care and retirement savings, an astounding 80% value financial literacy, which many companies report providing, though employees don’t always know exists.

Also, according to The Standard data, Gen Z employees value saving and financial literacy over reducing credit card or student loan debt. Research shows this generation owes less in both categories than other generations, which is likely why their priorities lie elsewhere.

They are eager to receive planning information to save for and invest in their future. 79% of Gen Z workers say this is their main priority while only 37% say paying off debt is their top goal. However, HR leaders and managers think over half of their employees consider the latter of top importance.

Addressing this disconnect is the first step in giving Gen Z employees the financial resources and benefits they need and providing a greater incentive for them to stay with their companies.

Financial wellness benefits: where to begin?

There is a range of valuable financial wellness benefits to offer. However, not all carry the same weight as others. Here are a few popular options to consider, though it’s best to consult directly with employees to hear firsthand where their current demands lie.

Contributions to 401(k) savings

Saving for a strong financial future aligns with what other generations want as well. Therefore, it’s smart to stick with a solid retirement savings plan or introduce one in the coming year.

When establishing retirement savings programs, broker clients must be aware of contribution limits and be prepared for changes which often occur year to year. Currently, the amount employees can contribute to a SIMPLE or automatic enrollment 401(k) plan is limited to $23,000.

A PEO can help SMBs navigate which direction is best and provide an explanation for employees of what the offerings mean for their savings goals.

Financial coaching and resources

Gen Zers also want access to professional financial advisors and information to guide their financial decisions. According to The Standard, 80% report the importance of financial education and advice, though only 46% report having it provided by their company.

These types of benefits may be available as part of an Employee Assistance Program (EAP). An EAP also offers free, confidential support regarding legal matters and mental health concerns, which is helpful in managing the stress and anxiety employees have about their finances. 54% of Gen Zers say the thought of dealing with insurance makes them feel overwhelmed or anxious.

Benefit transparency

Based on the disconnect between what Gen Zers are asking for and what decision-makers think they want, benefit transparency is essential. SMBs need to make their employees aware of the benefits available to them and the value they provide.

Often, benefits are only reviewed once per year during the enrollment period. However, scheduling frequent reminders and setting up internal surveys or feedback sessions will keep SMB leaders and employees aligned with whether or not they still hold weight.

Additionally, providing support for supervisors is critical as well. 62% of managers report Gen Z workers ask them benefit questions. Though managers are not expected to be experts, having a stronger understanding of their employees’ financial goals and concerns makes them more effective in directing them to relevant benefit information.

Benefits as part of a comprehensive HR solution

Though benefits continue to be a source of confusion and change for many broker clients, there is a cost-effective comprehensive HR solution available. Brokers instantly expand their offerings and increase client satisfaction through a PEO partnership.

Instead of keeping benefit services separate from the rest of HR, benefit administration becomes part of a holistic strategy for recruiting and retention. Plus, it frees up time for SMB leaders to focus on other areas of company growth.

ExtensisHR works collaboratively with SMBs to customize benefits for multiple generations of employees. And, as a Certified PEO (CPEO), brokers and their clients can rely on a dedicated team of HR experts who abide by the highest regulatory standards set by the U.S. government and the PEO’s industry financial assurance program.

Benefit trends are hard to keep track of, which is why working with a PEO is a positive strategy for SMBs to stay competitive.

Contact ExtensisHR today and learn how our HR and benefit services deliver support for you and your client’s business goals.