WITH the growing representation of millennials in the workplace, it is expected that this group will make up almost a quarter of the global workforce by 2020.
Nashalin Portrag, the head of FundsAtWork at Momentum Corporate, referred to the Momentum/Unisa Consumer Financial Vulnerability Index, which shows that millennials are the most financially vulnerable age group. “While millennials’ tendency to have low savings and high levels of debt is exacerbated by the weak local economic environment, we believe that poor financial literacy is a key driver of their continued financial vulnerability.”
As such, he said that South African employers have a vested interest in helping millennials to make better financial decisions. “Employees who are financially unwell are more stressed at work, which negatively impacts their productivity. This is referred to as ‘presenteeism’ – when employees are at work, but are not productive because they are distracted. From an employer’s perspective, an employee benefits solution that enables improved employee financial wellness makes sense. By boosting the financial stability of employees, productivity is improved, which ultimately supports the business’ bottom line.”
The index shows that presenteeism could be costing South African companies an additional R89 billion or 5% of gross operating profits in lost employee productivity. Financial struggles, such as over-indebtedness and a lack of savings for unplanned expenses, make up 22% of all the drivers of presenteeism. Portrag said it is therefore paramount for the future of South Africa’s economy that employers do their utmost to encourage millennials to save better for expected and unexpected expenses that they may incur.
“This begins with understanding the common money mistakes that South African millennials are making by ‘living in the now’ and failing to prepare financially.” He said that only a handful of millennials save enough for retirement. “However, the rest still have time to change this behaviour by making sure their retirement contribution is appropriate and that they keep their retirement savings invested when they change jobs instead of taking it in cash.”
Millennials’ lack of financial provision is not limited to their retirement savings only, he said. “It also includes their lack of provision for insurance cover for unexpected incidents like disability, based on the analytics. Millennials are generally underinsured for death and disability.” Given millennials’ low propensity to save for retirement and unexpected life events, he said that employee benefits should ideally be integrated and flexible to assist them in making better financial decisions and to adopt healthy saving habits.
“Financial advisers should consider millennials’ poor financial habits when providing their clients with ‘best-of-advice’ solutions. An ideal employee benefits solution could change millennials’ poor spending habits and therefore financially enhance South Africa’s young workforce,” Portrag said.
Supplied by the MSL Group