Without a doubt, your employees have financial questions – some of them are those they should know the answer to already.

Research shows that only 40% of Americans1 have sufficient financial knowledge to make good financial decisions.

Thankfully, three out of four2 agree that they need advice from a reputable source. 

But what questions do your employees still need answered?

A survey - or needs assessment - is the best way to discover the answer for your specific employee population, but here are 25 of the most common financial questions among employees – and how having a holistic employee financial wellness plan can help answer these questions.

Understanding General Personal Finances

1. What does it mean to create a personal budget?

A recent Penny Hoarder Budgeting Survey3 found that 55% of Americans do not use a budget, and 56% have no idea how much money they spent in the past month.

Despite research showing that budgeting helps people make better financial decisions, half of Americans just don’t think it is necessary.

Role of a Financial Wellness Plan:

2. Do I need an accountant to do my taxes?

A GoBankingRates survey4 found that 43% of Americans file their taxes using an online digital service or by hand.

Just 36.8% hire a professional to help. 

Role of a Financial Wellness Plan:

  • Help employees determine if their tax situation is simple or complex.
  • Provide resources for free and low-cost tax return solutions.
  • Answer general questions about tax filing.

3. Who can I claim on my taxes?

Your employees may wonder who they are allowed to claim on their taxes.

For instance, can they claim a live-in partner? A parent? A child away at school? A child who is not in school but still lives at home? 

Role of a Financial Wellness Plan:

  • Help employees understand the IRS definition of dependent.
  • Provide rules for determining a qualifying child or relative.

4. I’ve gotten a letter that the IRS is doing an audit. What does that mean?

The more money an employee makes, the more likely they will be audited.

The IRS says that those making $10 million or more per year have an audit rate of 8.16%.

Those making between $1 and $10 million have a rate of 2.53%.

For everyone else, the rate is below 1%5.

Despite the chances being low, one of your employees can still be involved in an IRS audit.

Role of a Financial Wellness Plan:

  • Explain what might prompt an IRS audit to employees.
  • Provide a to-do list for those facing an audit.

5. My spouse has a lot of debt. Am I responsible for it?

The answer to this question lies in whether the employee lives in a community property state or not and whether the account is a joint account.

Role of a Financial Wellness Plan:

  • Explain the difference between a community property state and a common-law state.
  • Explain how joint accounts work and the pros and cons of having joint accounts.
  • Provide tips and tools for getting out of debt.

6. Is life insurance important?

The 2020 Insurance Barometer Study6 found that 54% of Americans have life insurance.

Whether your employees need life insurance depends on their personal life situation.

Role of Financial Wellness Plan:

  • Explain the role of life insurance.
  • Explain the difference between term and whole life policies.
  • Provide tips for determining the need for life insurance.
  • Provide explanations to determine the amount of life insurance needed. 

Understanding Checking and Savings Accounts

7. What is the routing number for my checking/savings account?

Checking and savings accounts have two main numbers.

One is the account number, and this number is unique to you. The other is the routing number which tells which bank the account belongs to.

Role of a Financial Wellness Plan:

  • Show the numbers on different accounts to help employees identify the numbers needed when asked for an account or routing number, especially for direct deposits and withdrawals. 

8. Should I transfer money using a wire transfer or an ACH transfer?

Both a write transfer and ACH transfer can take money from one account and move it to another.

The difference is how much time it takes and how much it costs. 

Role of a Financial Wellness Plan:

  • Help employees understand that wire transfers are immediate but typically cost money – sometimes as much as $30. ACH transfers are usually free but can take a few days.
  • Help them evaluate their situation to determine the best way to transfer money. 

Understanding Credit Cards

9. What is a credit card, and how does it work? 

Although this may be hard to believe, many employees, especially young employees, don’t understand how a credit card works, especially in terms of interest. 

Role of a Financial Wellness Plan:

  • Teach employees how to choose a credit card by understanding when interest begins to accrue, evaluating the interest rate, and determining whether the card has a yearly fee.

10. Is making a minimum payment on a credit card enough?

Many employees assume that since they will not receive a penalty for paying the minimum balance on their credit card, that this is a good practice.

However, paying only the minimum, which is about 2% of the balance, adds a lot of interest to a purchase. 

Role of a Financial Wellness Plan:

  • Use a calculator tool to show employees what happens when only minimum payments are made.
  • For example, with the average credit card interest at 16%7, a $1,000 purchase would take 58 months to pay off and add $442 in interest.

11. Are credit card points something to consider when choosing a credit card?

Credit cards often offer points for purchases.

You can trade in these points for cash, miles toward airline tickets, gift cards, or prizes.

They may even offer bonus points for signing up and making a certain number of purchases within the first several months of having the card. 

Role of a Financial Wellness Plan:

  • Explains when to consider points on a credit card.
  • For instance, is the reward something your employee will use, are they planning to carry a balance, and is the reward significantly higher than the annual fee?

Understanding Loans

12. What is a personal loan?

This is a loan that an employee takes out with a bank for a home, auto, or other personal reason.

How the personal loan funds are used is up to the employee.

Role of a Financial Wellness Plan:

  • Discuss the difference between a secured and unsecured loan.
  • Discover ways to get the best rate.

13. Is a car loan a personal loan?

Car loans are similar to personal loans, with one exception – they are designed specifically to purchase a car.

They are designed to help employees buy a car that they cannot afford to purchase outright.

Role of a Financial Wellness Plan:

  • Teach employees about car loans, the best terms, and how to get the lowest interest rates. 

14. Is a mortgage a personal loan?

Once again, a mortgage is similar to a personal loan.

However, a mortgage is a loan made specifically to buy a home.

Standard mortgages are 30 years, but can be less.

Mortgage payments start with a large percentage going toward interest. This is called an amortized loan.

Role of a Financial Wellness Plan:

  • Help employees understand fixed vs adjustable-rate loans.
  • Explain how amortization works.
  • Use tools to show how paying extra principal payments reduce the amount of interest paid on the loan. 

15. My lender wants to charge me PMI. What is it?

PMI is the acronym for Private Mortgage Insurance.

This is insurance that protects the lender in case the buyer doesn’t pay back the loan.

PMI is often required when the buyer doesn’t put 20% down on a home.

Role of a Financial Wellness Plan:

  • Help employees understand the role of PMI and how it protects the lender.
  • Explain the costs of PMI.
  • Provide tips for avoiding PMI. 

16. I want to purchase a home. What do I need to make the process go smoother?

The home buying process is complicated, especially for first-time homebuyers.

Having the right knowledge before beginning will help employees find their dream home without as much stress.

Role of a Financial Wellness Plan:

  • Understand what paperwork is needed.
  • Help them understand the role of the lender and underwriter.
  • Discuss common pitfalls for first-time homebuyers. 

Understanding Credit Scores

17. What is a credit score, and how is it calculated?

A credit score helps lenders determine how creditworthy someone is and whether they should lend money.

The higher the score, the better the chances are of receiving a loan with good terms.

Role of a Financial Wellness Plan:

  • Explain the anatomy of a credit report and score.
  • Help employees understand that credit scores are based on their past performance with loans.
  • Teach them habits that will increase their credit score – such as making timely payments, keeping debt low, and finding various loans to create the right mix.
A 12-Month Study showed how much credit scores increased for people that used a financial wellness program.

18. What is considered a good credit score?

How strong a credit score needs to be depends on what the employee needs. However, higher scores are always better. 

Role of a Financial Wellness Plan:

  • Explain that credit scores are broken down into categories: Excellent (800+), Very Good (740-799), Good (670-739), Fair (580-669), and Poor (below 580).
  • Help employees understand how low credit can affect them.

19. Can a poor credit score affect my employment?

It depends on where an employee lives and what job they want. 

Role of a Financial Wellness Plan:

  • Help employees understand when they'll need to use their credit in job searches (certain areas of the country and some jobs such as law enforcement).
  • Provide them with tips for dealing with a poor credit score. 

Understanding Retirement Savings

20. How much do I need to save for retirement?

Americans are not prepared for retirement.

A recent Motley Fool study8 found that 25% have no retirement savings and the average retirement savings account held only $65,000. 

Role of a Financial Wellness Plan:

  • Help employees determine the amount they need to retire, which is often between 70 and 90 percent of their pre-retirement income.
  • Provide tips for saving effectively.
  • Caution against late starts and early withdrawals. 

21. I need to pick investments for my 401k. How do I decide what is best?

Nearly two-thirds of Americans9 do not understand their 401(k) or how it works.

This includes how to choose the best investments.

Poor investment choices can mean the difference between retiring on time and having to delay retirement.

Delayed retirement costs employers $50,000 per year per employee10.

Role of a Financial Wellness Plan:

  • Teach employees asset allocation based on investment objectives and risk tolerance. 

Understanding Investing

22. How much money do I need to start investing?

Most employees can begin investing with as little as $100.

However, the trick is not having enough money but having enough knowledge to know what to do with it.

Role of a Financial Wellness Plan:

  • Teach investment basics.
  • Explain the difference between investing with full-service financial professionals and online brokers.
  • Discuss the difference between stocks, bonds, and mutual funds. 

23. What are capital gains, and do they matter to me?

One-third of those who do not invest don’t invest because they don’t understand investing11.

This includes things like capital gains taxes and how they might affect them. 

Role of a Financial Wellness Plan:

  • Define long-term and short-term capital gains.
  • Explain how these two types of capital gains are taxed differently.
  • Offer tips for reducing capital gains exposure.

24. How do interest rate increases affect my bond payments?

Bonds are fixed-income investments.

This means that the payments made to the investor are unchanging.

That makes knowing when to buy bonds critical.

Role of a Financial Wellness Plan:

  • Explain the relationship between bonds and interest rates.
  • Help employees determine when to purchase bonds.
  • Determine the right mix of bonds in a given portfolio.

25. Is it risky to invest in CDs?

CDs are a relatively safe investment because they are insured by the Federal Deposit Insurance Corporation (FDIC).

However, there are limits on this insurance.

Role of a Financial Wellness Plan:

  • Explain the limits of FDIC insurance ($250,000 per depositor, per bank, per account type).
  • Provide insights about including CDs in an investment portfolio.

 

1 - https://milkeninstitute.org/sites/default/files/2021-08/Financial%20Literacy%20in%20the%20United%20States.pdf

2 - https://www.nfcc.org/resources/client-impact-and-research/2020-consumer-financial-literacy-survey/ 

3 - https://www.thepennyhoarder.com/budgeting/budgeting-statistics/

4 - https://www.gobankingrates.com/taxes/filing/43-percent-americans-file-taxes-comfort-home-survey-finds/ 

5 - https://www.irs.gov/about-irs/irs-audit-rates-significantly-increase-as-income-rises 

6 - https://www.limra.com/en/research/research-abstracts-public/2020/2020-insurance-barometer-study/ 

7 - https://www.creditcards.com/credit-card-news/rate-report/ 

8 - https://www.fool.com/research/average-retirement-savings/ 

9 - https://www.cnbc.com/2019/03/07/63-percent-of-americans-are-confused-about-401k-retirement-plans.html

10 - https://pensionmark.com/blog-post/when-employees-retire-matters-to-them-and-to-employers

11 - https://grow.acorns.com/what-keeps-people-from-investing/