Nelson Mandela once said, “Education is the most powerful weapon which you can use to change the world.” I’m no Nelson Mandela, but I too believe in the power of education. The world might be a lofty goal, but education can undoubtedly change your business. Before we detail how to use financial education to improve your company; though, we must understand why it’s needed.
Your Staff Doesn’t Know
Financial literacy means having a basic knowledge and understanding of financial matters. While many people may believe they’re financially literate, few actually do. A 2016 article from The Atlantic details the many ways this financial illiteracy can negatively impact your staff.
According to the article, individuals with lower levels of debt literacy are more likely to do things that result in higher fees and charges. In fact, up to one-third of the fees and charges paid on credit cards, are a result of a lack of knowledge. Similarly, misconduct by financial advisors is concentrated in counties a significant elderly population or low levels of financial education.
Clearly, financial literacy is critical. In fact, it’s estimated, by the National Bureau of Economic Research that one-third of the world’s income inequality could be accounted for by disparities in financial knowledge.
The Perils of Financial Stress
Whether you know or not, it’s likely many of your employees are struggling with financial stress. According to a 2017 survey by the American Psychological Association, 62 percent of Americans reported being stressed out about money. This financial stress can wreak havoc on an employee’s health and productivity.
Financial stress can result in increased anxiety and depression. Additionally, Cambridge Credit Counseling says financial stress can also worse such health issues as:
- Heart Disease/Attack
- Gastrointestinal Problems
- Weight Gain/Loss
- Eating Disorders
- High Blood Pressure
- Substance Abuse
This financial stress has a similar adverse effect on a business, overall. Last year, a survey from Mercer found that U.S. employers lose up to $250 billion in lost wages due to financial stress. According to the study the average employee spends 13 hours per month, at work, worrying about finances. And 16 percent of respondents, spent more than 20 hours.
The Financial Fitness Group has reported similar statistics that illustrate the impact of financial stress on the workplace. Financial Fitness reported financial stress is affecting a whopping 80 percent of employees. This stress, according to HR Dive, decreases employees’ productivity.
Also, when workers don’t retire, because they can’t afford to, it creates high healthcare costs and a talent drain when these older workers eventually do begin retiring. Financial education can help combat these negative effects.
Financial Education Services
We now know what financial stress is. And, we understand how much of an impact it can have on your employees and business, at large. But the question remains, how do we combat the harmful effects of financial stress? The answer is financial education services.
Financial education services are benefits a company provides to their employees to educate about and improve their financial literacy. Topics covered under financial education can include retirement savings and planning, building emergency savings, budget management, and identity protection.
Designing and Implementing Financial Education Services
Financial education services are like any other employee benefit. You need to have a concrete plan before you implement the policy. When designing your financial education policy, it’s important to include specific features to maximize the policy’s effectiveness. Make sure your financial education consists of these features:
The first characteristic your financial education plan must have is a clear and concise mission. Your financial education needs to be like a company, in general. A mission statement is necessary to give the education plan a direction and tangible goals. Without a clear path, your education services may sputter and not deliver the results you seek.
2. Adequate Resource Allocation
Your financial education plan needs the proper amount of resources to flourish. Whether you use a third-party or do it in-house, your education plan will require a certain amount of money, time, and company resources. Whoever is responsible for running your financial education plan will need the proper resources to design a course, develop, materials, and possibly train instructors.
3. Outreach/ Awareness
Ensure your employees know about your education plan to maximize the plan’s effectiveness. This advice may seem obvious, but many people don’t realize the importance of internal marketing for employee benefits, and participation suffers as a result. Internal marketing is especially essential for an enhanced benefit offering, such as financial education.
To get the best participation rates, and subsequently maximize effectiveness, your company must market its financial education services. According to a Guardian study from last June, 80 percent of employees believed they understood their benefits. When, in reality, only 49 percent did. This study highlights the need for organizations to market their benefits, such as financial education, effectively.
A significant component of your financial education plan’s success is making it accessible and inclusive to every member of your organization. This inclusivity means going out of the way to include segments of your workforce that may be underserved by past financial education services. Women, for example, have been traditionally underserved when it comes to access to financial services.
According to 2018 study by BNY Mellon, women still have only 77 percent of the access to the basic financial services that men do. This access is hindered despite the fact women influence or control 25-30 percent of global wealth. Your organization can give women employees access to these services through your financial education plan.
Economic status and age are other examples of diversity your financial education services will need to target, to maximize success. According to a study by MassMutual, those employees who are lower and middle-income workers are much more likely to say they wish their employer did more to help them set financial priorities.
5. One-on-One Meetings
Here at The Olson Group, we firmly believe in the power of one-on-one meetings, especially concerning your finances. Individual meetings give your employees the ability to ask financial questions specific to their situation. These meetings also allow workers to ask questions they wouldn’t ask in a public setting. Use one-on-ones to solidify your workers’ understanding of their financial position.
6. Evaluate and Follow-Up
The final step in creating a successful financial education program is evaluation. Review your program’s curriculum and make sure it’s still relevant for the next year or learning period. Similarly, follow-up with participants to determine their application of the education. You should also use these follow-ups to ask questions on how you can improve the course.
The previously mentioned MassMutual study found there’s a real disparity between the number of employees who want financial education benefits and those who are actually offered it. Only one in four employees are offered financial education at work, but more than half said they’d want their employer to provide more financial education.
So, give your workers what they want. Use financial education services to improve your employees’ financial literacy and strengthen your company-wide performance as a result. Wield your financial education plan like the true performance-improvement weapon it can be.