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Use "Nudge Theory" to Ignite Financial Wellness Engagement


Last Update: January 24, 2022

Over the past year, nearly half of adults are experiencing more health-related stress1, and three out of five employees are feeling more financial stress2

Since the start of the global pandemic, more employers have been trying to reduce employee stress. According to the TIAA-CREF Retirement Insights Survey3, the three main focal points are:

  • Employee health and safety – 82 percent
  • Employee financial wellness – 69 percent
  • Retirement preparedness – 60 percent

Despite employers emphasizing these areas, the same survey shows that employees haven’t noticed the heightened focus on anything other than health and safety.

When asked, employees were aware of the extra information about hand-washing, social distancing, and mask-wearing (75 percent), but not about financial wellness (32 percent) or retirement preparedness (25 percent).

In fact, less than one in four employees felt their employers were making a significant effort to deal with their financial stressors.

The explanation is likely due to the nature of the pandemic. With a health-related crisis at hand, employees have been primed to see and respond to extra efforts dealing with their health and are less likely to note the extra efforts dealing with financial wellness.

This change does not mean that employers should stop worrying about employee financial stress, nor does it mean that employers have to shove the information down their employees’ throats.

The answer lies in understanding and using the Nudge Theory.

The Nudge Theory Explained

To influence an employee’s behavior or decision-making process, employers often use education, rules, enforcement, or forbidding other choices.

For instance, if an employer wants employees to be safer, they may offer safety classes dealing with specific job duties. They may create safety rules, such as what equipment to use when climbing a ladder. They may even enforce these rules by writing up employees who are not following safety procedures.

However, when it comes to financial wellness and retirement preparation, an employer cannot create mandates for participation or forbid choices. Nor can they enforce specific decisions.

Employers can offer financial wellness-focused classes but participation is optional, and employees often don’t seek information until they see a need4. 

That’s where Nudge Theory5 comes in. With this theory, employers can offer a nudge, defined as something easy and cheap to avoid.

In other words, the employer can provide an indirect suggestion or positive reinforcement, which provides needed information that an employee can easily ignore.

Employers keep financial wellness topics at the forefront of an employee’s mind by providing these nudges. Thus, when an employee makes a financial decision, the information you want them to consider will be available.

3 Easy Ways to Apply the Nudge Theory

In reality, the Nudge Theory means offering reminders about financial wellness to employees in a natural way. Here are three things you can do to apply the Nudge Theory.

1. Create Messages to Influence Behavior

As you send out emails, notices, newsletters, and other communications to employees, be sure to include a financial wellness nudge. Such nudges can be:

  • Call to Action: These include things you want your employees to do. Like rollover prior employee 401(k)s, start an emergency fund, or sign up for the employer-sponsored financial wellness program.
  • Financial Education: These are financial facts that employees may need to know. Such as “the earlier you start saving for retirement, the more compounded interest works in your favor,” “carrying debt greater than 30 percent of your income is bad for your credit score,” or “having an emergency fund that covers three to six months of living expenses is key to lowering financial stress.”
  • Reminders: These nudges remind employees about things they might need to do if certain situations arise. Don’t forget to update your address on your 401(k) if you’ve moved, or be sure to ask for an extension if you can’t complete your taxes by April 15th. 

2. Include Stats to Grab Attention

Statistics are a great way to get the attention of employees. Some statistics to consider include:

  • 401(k) loans and cash-outs can decrease retirement savings by 25 percent. Read more from the Center of Retirement Research at Boston College6
  • If you start saving $80 per week for retirement at the age of 20, you will have a million dollars saved by the time you are 67. However, to get to one million in savings at the age of 40, you will have to save $310 per week7.
  • A $2,000 credit card balance at an 18 percent annual rate will take just over 30 years to pay off if you pay only the minimum payment, and you will end up paying $4,931 in interest8.

 3. Put the Nudges Everywhere

Not only do you need to send nudges in digital communications, but be sure these nudges are everywhere an employee might see them:

  • Benefit portal homepage
  • Plan websites
  • Digital announcement boards
  • Physical bulletin boards in employee break rooms


Nudges can help employees see that you care about and are focused on their financial wellness. By offering financial wellness nudges, you have the power to influence behaviors and decisions concerning financial issues, thus creating financially well and prepared employees


1 - https://www.apa.org/news/press/releases/stress/2021/one-year-pandemic-stress

2 - https://hrexecutive.com/employees-looking-for-help-as-pandemic-increases-financial-stress/

3 - https://www.tiaa.org/public/pdf/executive_summary-the_tiaa_retirement_insights_survey.pdf 

4 - https://www.pwc.com/us/en/industries/private-company-services/images/pwc-8th-annual-employee-financial-wellness-survey-2019-results.pdf 

5 - https://en.wikipedia.org/wiki/Nudge_(book)

6 - http://crr.bc.edu/wp-content/uploads/2015/01/IB_15-2.pdf 

7 - https://www.cnbc.com/2020/09/22/retiring-with-1-million-how-much-money-you-need-to-save-each-month.html 

8 - https://www.marketwatch.com/story/how-long-does-it-take-to-clear-a-2000-credit-card-with-minimum-payments-2015-07-07#:~:text=A %20%242%2C000%20credit%20balance%20with,30%20years%20to%20pay%20off. 



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