As defined by Investopedia, financial literacy is education and understanding on efficiently managing personal finance areas, including investing, insurance, real estate, retirement and budgeting.
Financial stress can contribute to diminished quality of customer service; increased administrative costs, due to wage garnishment and loans from 401(k) accounts; and a distracted workforce with lower levels of productivity. Minimize these outcomes and invest in a loyal workforce by prioritizing your employees’ financial literacy.
Gain competitive edge
Research from the Society for Human Resource Management (SHRM) found that 37% of HR professionals believe employees at their organization have missed work for a financial emergency in the last year, while 61% describe their employees’ financial health as “fair” or “less than fair.” Employ a significant number of millennials? SHRM has found the 25-to-34 age group to be the most financially stressed of all.
Many employers believe that educating their employees on financial literacy will reduce turnover and build employee loyalty, according to the Consumer Financial Protection Bureau’s Financial Wellness at Work report. If employee retention is a priority in your business, the financial know-how of your workforce should be as well.
In fact, 60% of employers surveyed by management consulting firm Aon Hewitt in 2017 said that the financial well-being of their employees has increased in importance in the last two years. Maintain or gain a competitive advantage in hiring and retention by ensuring that your employees feel valued with education that resonates with their needs.
Make it accessible
One cost-effective initial step to improving your employees’ financial literacy is sharing information on its topics. Many organizations provide literature about their 401(k) or employee stock options; others add additional resources to meet their employees’ specific needs.
These other options include training their people on investing or basic budgeting techniques, whether through a learning management system or in-person workshops. Some employers may connect their employees with a third-party financial adviser, or offer financial counseling during crises as a part of an employer assistance program.
Financial literacy may be intimidating to your employees, but it doesn’t have to be. For example, Harvard finance professor Mihir Desai uses stories, literature and music in his 2016 book, The Wisdom of Finance: Discovering Humanity in the World of Risk and Return, to demonstrate that financial principles can and should be accessible.
Click here to listen to the HR Break Room podcast interview with Mihir Desai.
Become a trusted resource
Your employees already make several important financial decisions when they come to work. They may decide which health care plan best fits their needs, whether or not to invest the fully matched amount in their 401(k) or how much of their paycheck should divert automatically to their savings account.
Improving their financial literacy builds upon the financial decisions they already make at work, and demonstrates that your company prioritizes investing in them. Employees who feel valued are more likely to be loyal, productive members of your workforce.
For more about financial literacy in the workplace, read Dollars and Sense: Financial Literacy for the Millennial Workforce.
