Finance as a Second Language
November 23, 2010The ABCs of finance includes an alphabet soup of financial jargon and lingo that can be as confusing as a foreign language for some employees. Starting with abbreviations like APR, BRIC, ETFs, FSAs, HSAs, IRAs, and ending up with terminology like zero coupon bonds, it is no wonder that many employees give up on trying to figure out how to translate their benefits and investment options. It gets really confusing for employees that have a spouse that works for a government agency or a non-profit since the spouse’s 401(k) might actually be called a 403(b) or TSA.
I recently sat down with an employee whose husband worked for the Postal Service and had access to the federal government’s Thrift Plan. He delegated the task of managing his investments to his wife and she was overwhelmed when trying to figure out what the C,F,I, L, and S Funds were, so I walked her through the translation: C is for common stock, I is for international fund, F is for fixed income, etc. We then compared the Thrift Plan funds with the funds in her ING retirement plan so that she could make sure both accounts had the appropriate asset allocation based on their ages and risk tolerance. It is important that employees who are married have access to this level of combined financial guidance.
So, would your plan provider representative have the ability or flexibility to offer this type of outside perspective? The reality is that there is usually one spouse who makes the majority of financial decisions, and it can be very beneficial to offer a translator or a worksite financial coach who speaks fluently in all financial matters.
Just last week I conducted a workshop regarding a new pension plan being phased in for a group of employees, and the term “vesting” appeared in at least three slides. I know what it means, so saying if felt very natural, until an employee made a joke about how vests aren’t in style anymore so she didn’t want to be vested. Another example of our second language of financial lingo those of us in the Human Resources or Retirement Planning field use that aren’t exactly everyday words. No, “vesting” isn’t a new uniform you are required to wear. So, I started to say “you own it” after 3 years, instead of “you are vested” after 3 years. I certainly didn’t want her to be unfashionable.
As you schedule benefits workshops, consider the level of financial jargon and make sure you have an easy to understand translator to facilitate and decipher the ABCs of “benefits speak” and that you survey your employees after any benefits communication workshops to determine if the information was indeed easy to understand.