April is National Financial Literacy Month. According to the Office of the Comptroller of the Currency (OCC), “’Financial literacy’ describes the skills, knowledge, and tools that equip people to make individual financial decisions and actions to attain their goals; this may also be known as financial capability, especially when paired with access to financial products and services.” Unfortunately, many owners and employees are financially illiterate. What should owners and employees know?
The basics
Judging from the amount of outstanding credit card debt–$1.211 trillion in Q4 2024—it’s easy to conclude that many consumers (your employees) probably don’t know how to handle money, at least not well. Add to this the fact that there’s $1.777 trillion of outstanding student loan debt. It’s no wonder that employees are financially stressed, and that this stress can impact small businesses. For example, it’s been reported that employees’ financial stress results in a 15% decline in productivity.
I think financial literacy also includes an understanding of tax basics—deductions, credits, payment and filing obligations, etc. While April 15 is a good reminder of this, taxes are really a year-round endeavor. But a discussion of taxes is for another time.
Owners
You’d think all small business owners would be financially literate, that they’d be able to read and understand financial statements (balance sheets; P&L statements; cash flow statements), and skillfully handle debt, cash flow, and budgeting. Unfortunately, this isn’t universally the case; many owners wing it when it comes to their numbers. Here are some ideas for business owners:
- Learn to read financial statements. There are many online resources—guides and videos—to explain financial statements and how to understand them. For example, TD Bank offers 4 Financial Statements to Manage Small Business Finances.
- Save for retirement. Many owners look upon their company as their retirement nest egg. Unfortunately, when it comes time to retire and sell the business, the anticipated sale price just isn’t there. Just think if you were a franchisee of a Blockbuster store; your funds for retirement (the value of the business) may have dwindled to zero. Who knows what AI will do to business valuations in the future? A better course of action is to optimize savings through a qualified retirement plan and other investment options. Failing to do this shows a lack of financial literacy.
- Monitor debt. Access to borrowing is easy, as long as you’re willing to pay the interest. While some types of loans have modest interest costs, others can be exorbitant. The average business loan interest rates in April 2025 range from 54% to 11.7% at banks; online loan costs may be higher. Merchant cash advance loans can have an APR of 40% to 350%. It’s hard to be profitable, despite strong sales, when a good chunk of money is going to debt servicing.
Employees
It’s sad but true that a growing segment of hardworking individuals are struggling to make ends meet. One survey found that 60% of full-time employees are stressed about their finances. Small businesses may not be in a position to simply increase wages and benefits to alleviate this stress, but there are still actions that can help. Some ideas were covered in a previous blog, but here are some other ideas for business owners to use in helping employees gain financial literacy in the hopes of better managing their money and reducing their financial stress:
- Adopt a financial wellness program. Employees can get a better handle on their monthly expenses if they learn to budget and better understand the concepts of need versus want. For example, Your Money Line is a financial wellness program that connects employees to all their accounts, helps them make a budget and stick to it, and monitors their credit scores. Nudge is another financial wellness program that employers can adopt for their staff.
- Offer information and referral services. Employers can post information about financial literacy, such an article from Stash which runs through the 7 principles:
- Earn
- Budget
- Save and invest
- Debt management
- Credit
- Borrow
- Protection
- Financial planning
- Implement a qualified retirement plan. If your business doesn’t have a plan in place, consider adopting one. This gives employees the opportunity to save for the future. If you don’t yet have a plan but set on up, you may qualify for a tax credit to cover administrative costs and employee education about the plan. If you can’t afford to make contributions on behalf of employees, consider a starter 401(k), which is funded entirely by modest employee salary reduction contributions.
Final thoughts
My favorite quotation (which is taped to my monitor) is from Benjamin Franklin: “An investment in knowledge pays the best interest.”
Spend the time to improve your financial literacy as well as helping employees to do the same.
OCC has a directory of resources on numerous topics related to financial literacy, including spend, borrow, and save, invest, and prepare for retirement.
