Your 401k Plan’s Emotional Bank Account

Stephen Covey was an American author, educator, businessman and public speaker who passed away in 2012. His most favorite book, the seven habits of highly effective people, sold 25 million copies worldwide. In the book, he creates a powerful metaphor called the “emotional bank account.”

We all know how our regular bank account works; when we make deposits, the balance goes up, when we withdraw it goes down. Covey’s metaphoric bank account works the same way, but it is for “emotional trust” with other people, not money.  Covey identifies ways to make deposits to this “emotional trust” account; keeping commitments, clarifying expectations, apologizing when we make mistakes and more. And if we make such deposits, this account will have a high balance, and it becomes easier when you make errors in the relationship (i.e., withdraw from the account) because you can draw down on the former reserve you built up in the relationship.

This idea is a great and clever metaphor to keep in mind with business and personal relationships of all types including the relationship between the 401k plan sponsor and 401k plan participant.

If you are an employer who sponsors a 401k or 403b retirement plan here are ways you can make DEPOSITS into your “emotional trust account” with your program’s participants:

  • Offer good investment choices with reasonable expense ratios
  • Communicate consistently and clearly with both written and verbal communications regarding investment changes, fee disclosures or anything else.
  • Offer a matching contribution or profit sharing if possible

And here are ways to make WITHDRAWALS from your 401k’s emotional bank account:

  • Offer underperforming investments with above-average expense ratios
  • Rarely communicate anything about the plan
  • Do not even consider matching or profit-sharing

Each project and situation are different, so there are no absolutes here but in the end, if you can make more deposits than withdrawals to your 401k “Emotional Bank Account” account, the plan will be successful, and retirement outcomes will improve for everyone!

Evan M. Levine is the President and Founder of Complete Advisors, an Independent RIA specializing in advising 401k Plan Sponsors and Participants.  He can be reached at 516-240-6161 or


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