Financial literacy is still a major issue in this country, particularly with regard to retirement savings and an online survey by ASB shows a huge gap for most people between the retirement income they want and what they will actually achieve at their existing rate of saving.
It seems most people have little understanding of how much money they need to save for retirement. Employers are in a good position to help educate their employees about retirement saving and ensure they are receiving the best possible advice on KiwiSaver contributions. Under present legislation personal advice on retirement savings should be given by an authorised adviser. However, employers can provide employees with generic information on retirement savings and make arrangements for them to receive personal advice from an adviser at the employer's or the employee's cost.
The financial literacy problem is not just about saving for retirement. It is also about how to save for more immediate goals such as buying a house, paying off a mortgage or taking an overseas trip. Most employees would benefit from education in simple budgeting techniques.
There are good reasons why employers should have a role in improving their employees' financial literacy.
It could be argued that they have a moral obligation to ensure their employees are able to make informed decisions about whether they join KiwiSaver, the level of their contributions and their choice of fund. Otherwise, employees may be short-changed by missing out on employer contributions and Government tax credits.
An equally compelling argument is that people who feel they are in control of their money are happier than those who feel as though they are living from payday to payday and not achieving their goals. Happy, contented people are easier to manage and more productive in the workplace.