Financial literacy for employees

Financial literacy is an unclear area for many. It’s a topic that’s often overlooked in school, oversaturated in bookstores and in blogs, and overwhelming for those wanting to educate themselves. With no proper financial education or a clear path to follow, those with low financial literacy may not be well equipped to make decisions related to essential personal finance choices like saving, investing, credit, debt, and more. Unfortunately, many Americans fall into this worrisome category.

The current state of financial literacy

Financial literacy rates have been consistently low for some time. For the past five years, Americans could correctly answer only around 50 percent of P-Fin Index questions that measure financial literacy.¹ Moreover, 20 percent demonstrated an extremely low level of financial literacy by correctly answering just 25 percent of questions.² This low level of financial savvy is perpetuated by school systems and parents that feel inadequate to provide help. Only 17 states require taking a high school course in personal finance but only 20% of teachers feel competent in teaching it. 72 percent of parents are reluctant to talk about money with their children.³

Guardian's report, Mind, Body, and Wallet: Workforce well-being in the pandemic era, found that the financial impact of the pandemic is Americans’ largest source of stress.⁴ An insufficient financial education can cause serious struggles. Uninformed financial decisions can greatly affect the areas of one’s life from mental health, physical wellness, and even work productivity.

Why should employers want to improve their employees’ financial literacy?

Employers can provide a high-value benefit by offering financial literacy programs to their workforce. It’s a strategy that may help to improve the productivity and retention of current workers and attract top-level talent.

Nearly 50 percent of those who are stressed about their finances say that it distracts them from work, saying they spend three hours or more each week thinking about or dealing with personal finance issues.⁵ 20 percent claim to spend five or more hours.⁶ Financial stress can also have an impact on physical health, leading to increased absenteeism and higher healthcare costs. About one-fourth of employees say their health has been impacted by financial worries.⁷ By teaching employees how to be financially literate, productivity and the amount of focused, working hours could potentially increase.

Financial stress may also influence employee retention and loyalty. Those who are stressed about their finances have a greater chance to be attracted to another company that cares more about their financial well-being. A majority of financially stressed employees also say their compensation isn’t matching the rising cost of living expenses and don’t believe that their employer’s benefit plans are competitive with other organizations.⁸ Providing financial education programs can help to reduce the levels of stress that could drive current employees to pursue a new job.

It may also play a role in attracting new workers. Financial wellness programs are a premium benefit that top-level talent is often looking for during the hiring process. More than 60 percent of Americans say that improving financial literacy is their top educational concern.⁹ However, less than one-third of employees report having access to financial guidance benefits.¹⁰ A Guardian study revealed that there is a high demand for financial education opportunities with nearly 75 percent of millennials saying they have attended a financial seminar, along with 69 percent of Gen X and 62 percent of baby boomers.¹¹ When companies step up to fill this information gap, it can be seen as a sign of your organization’s commitment to culture and investment in its workforce.

How to financially empower your employees

Whether it’s to resolve the concerns of distracted and disgruntled employees or to recruit the best talent, providing financial education programs can elevate your company’s productivity and culture. Once your organization buys into the importance of improving the financial literacy of its workers, where and how can you get started? Let’s outline five steps to building a well-rounded program that can help financially empower employees.

1. Survey employees to learn about their financial concerns

Whether you’re starting from scratch or re-evaluating your current benefits offerings, open a line of communication with employees. “Survey and ask them what they want. Why aren't you understanding where their struggles are? Why don't you know how many of them own homes or how much student debt is amongst the collective audience of your employers that are your employees? That could be something that you could be completely leveraging but you're not aware of because you're not tracking it,” said Angel Rich, Founder and CEO of The Wealth Factory, during our webinar, “ Sound Investment: How employers can help boost employees' financial literacy.”

You may assume that most of your employees would like a 401(k) program, or perhaps they’d want access to a financial professional, but that may only be the tip of the iceberg. Send out a simple survey to see what they’re interested in. It should include a wide range of topics such as:

• Paying off debt

• Credit management

• Saving for major goals

• Preparing for retirement

• Investment strategies

• Budgeting and spending

• Buying a home

Once the survey is fielded, you’ll understand the most important areas to focus on in your financial literacy programs.

2. Offer targeted guidance for a financially diverse workforce

Employees in different stages of life may want different financial guidance and the survey you conduct can help to identify this. Millennials may be interested in saving for a house or paying off student loans. Gen X workers could be interested in maximizing college savings for children or resolving credit card debt. Baby Boomers could be focused on retirement and end-of-life benefits. Offering opportunities that align with the specific financial concerns of your employees will help ensure that they’re getting the information they want most to alleviate their personal financial stresses.

3. Raise knowledge with customized communication

“I can’t tell you the amount of times we look at client’s plans and they are really just not taking advantage of all the wonderful benefits that a company is providing to their employees,” says Iván Watanabe, Managing Partner at Opus Private Client, LLC during our webinar, “ Financial Power Moves in 2021: Planning tactics beyond the basics.”

Ensuring your workforce knows about what benefits are available is crucial. However, as workers from different generations will have specific financial concerns, communication also isn’t a one-size-fits-all model. Customizing financial benefits awareness campaigns to fit the different generations of your workforce will help amplify their impact. Here are some options to consider:

• Emails

• Internal social media posts using platforms like Yammer

• Articles on your company’s intranet site

• Webinars

• Lunch and learn presentations

• Infographics that summarize key points

• Videos

Some testing may be needed to learn what sticks best for your workforce, but this deeper understanding will enable your internal communications to be more effective in all its campaigns. It’s a win-win.

4. Build and leverage partnerships

When offering options like long-term disability insurance, term and whole life insurances, and a 401(k) program, having a well-coordinated and in-depth enrollment meeting is important. Around annual enrollment time, leverage your benefits provider to bring in a professional and go through the options that are available, highlighting where there’s value relative to your employees’ specific circumstances. Ask them to set up a seminar/webinar to provide an overview and try to include 1-on-1 availability so they’ll be able to answer more nuanced questions clearly. There are also lots of helpful apps and companies that specialize in financial literacy. Reaching out to create a relationship could lead to offering a tangible new tool or a knowledgeable voice to help guide your employees.

5. Create a clear culture of support

Personal finances and asking for help can each independently be viewed as rather taboo topics. When combined, there’s a likely chance that some employees may feel embarrassed or uncomfortable about coming forward to utilize their benefits. Seek to create a clear and apparent culture of support. Do your part to reduce stigma and invite open conversations about financial literacy that can work to dispel the “money script” that talking about finances is inappropriate. Lead by example and show your workers the importance of financial education and transparency, which will in turn help employees to reduce their own financial stress and promote a more productive workplace.