“The number one problem in today’s generation and economy is the lack of financial literacy.” – Alan Greenspan, former Chairman of the Federal Reserve
April is National Financial Literacy Month, so now is a good time to think about your employees and their financial literacy. It’s commonly reported that 80% of U.S. adults never had financial education in school, so it’s no wonder that employees may lack the knowledge to handle money matters. It’s estimated that 40% to 50% of U.S. adults are financially illiterate, which could mean half a company’s workforce lacks the knowledge for the basic concepts of money management. This ignorance adversely affects both employees and their employers.
Why employers should care about employees’ financial literacy
More than half (57%) of employees in the U.S. live paycheck to paycheck. This causes stress, which adversely affects productivity and turnover as well as company culture. Financial stress can mean lower job satisfaction. Employees who aren’t knowledgeable about finances haven’t prepared for retirement; they may delay retirement, which can increase a company’s costs (e.g., higher wages to older workers). In other words, a company suffers when its employees are financially illiterate and stressed out about money.
Nearly half (48%) of employers are concerned about their employees’ financial well-being. But merely being concerned isn’t enough; action is needed.
What employers can do
Employers can offer programs to improve employees’ financial literacy. The programs can be crafted to fit within a company’s budget. Large companies may offer such expensive options as access to one-on-one financial coaches or financial advisers, but small businesses likely need to limit their offerings. Options can include webinars and seminars, as well as to referrals to financial experts if employees want to pursue their money management challenges on their own. Programs for employees should cover such topics as:
- Budgeting
- Debt management
- Retirement savings
BrightPlan, a company “redefining financial wellness for the modern workforce,” offers these suggestions (for more details about these suggestions, go to BrightPlan):
- Make financial education accessible
- Normalize financial conversation
- Provide personalized financial support
- Tie financial wellness into broader well-being programs
- Incentivize participation and progress
Final thought
Employers can provide short-term fixes to ease financial stress, such as payroll advance loans and penalty-free withdrawals from 401(k)s for emergencies (limited to $1,000/year). But these short-term fixes don’t address financial literacy.
As Robert Kiyosaki said: “Financial freedom is available to those who learn about it and work for it.”
Employers can help their employees become financially literate and it’s a good idea that they do so.
More concerning financial wellness for your employees can be found in this list of blogs here.
