Building an Effective Organization through Financial Literacy

Every year, the TIAA Institute-GFLEC Personal Finance Index measures the knowledge and understanding of personal finance concepts among US adults. This personal financial questionnaire is unique for its coverage of topics that estimate financial literacy in the country.

On average, US adults correctly answered only 50% of the questions on the 2021 exam. To that point, it’s clear that financial education is essential to help working adults better manage their money. According to studies, increased financial literacy can reduce the likelihood of using payday loans and increase credit scores among young adults.

It’s not an entirely hopeless situation. Employers, in particular, can help address this issue by offering personal finance education to their employees. As we discussed in our article on building a successful team, it’s an employers’ responsibility to guide their employees into doing great work, which means supporting them through personal concerns. Education is empowerment, so offering personal finance programs can help your employees move towards greater success.

Moreover, you don't have to go through this process alone. You can hire a financial expert, either permanently or freelance, who will help fill this knowledge gap. Certified financial planners will have had advanced financial training at a higher education level. As part of their finance degree they will have gained expertise in investing, banking, and wealth management. A financial expert with the right training is fully equipped to provide financial advice to you, and can guide your employees in their learning. You can work with them to craft a basic financial literacy course for your team.

Here are six benefits to improving your employees’ financial literacy:

Improves employee health and wellness

Being in debt and worrying about the cost of basic needs can create a lot of stress. And any kind of stress can cause a huge variety of health problems. External stressors have a significant impact on your mental health, leading to anxiety, mental confusion, depression, and poor sleep quality. Long-term stress may also appear as physical conditions like low energy, frequent headaches, upset stomach, or even heart disease — factors that don’t translate into healthy, well-performing employees. Through financial education, you can combat the financial stress responsible for absenteeism, lower productivity, and increase in healthcare costs. When employees learn how to create a budget, pay off debts, save for long-term goals, and build a retirement nest egg, they improve their financial position and cut down stress.

Reduces staff vulnerability

Most Americans don’t have enough money to cover a $1000 emergency. Unfortunately, these types of problems happen all too often, and desperation can drive honest people to do things they’d never normally consider. They may be tempted to “borrow” money from a client or company account — or even steal it outright. Your staff may also become vulnerable to unscrupulous institutions. They may take on dangerous loans from unlicensed moneylenders or give in to syndicates buying confidential information and proprietary secrets about your organization. Personal financial education, specifically on budgeting and saving, can go a long way in equipping them to handle financial emergencies.

Increases office morale and productivity

When financial literacy improves your employees’ personal situations, they can focus on work with a good frame of mind — which is key to productivity. Imagine if an employee was struggling financially, and decided to take on a side hustle. Their secondary work can interfere with their full-time job; they may be distracted or too tired to put in a full day’s effort, and fail to deliver quality output on time. With adequate education, they can be less preoccupied with money worries because they have a handle on their finances. Their positive mood and outlook can spread to the rest of the office, boosting office confidence, rather than inviting conflict.

 

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Builds employee skills across the board

One way to measure your employees’ financial literacy is by asking them to take a financial literacy test. Their results here can help employers better map out their approach towards unfamiliar financial concepts. Likewise, you can employ this strategy for other work-relevant topics, such as programming or analytics. An internal, data-based upskilling program or course can improve employee skills and performance across the board. By emphasizing the importance of continued education, your staff members may be motivated to pursue additional learning for their own growth.

Supports recruitment and retention programs

In September 2021, the national unemployment rate fell from 4.8% to 4.6%. However, millions remain outside the labor force due to changes caused by the pandemic. Companies are currently fighting to attract and retain talent. Employers should understand that employees are now valuing experience over money, so a culture of upskilling for worker growth can keep you ahead of the competition. When you train employees in critical life skills and show you care about their financial health, they’re more likely to reciprocate that loyalty. Retention will also be easier, because your staff won’t feel financial pressure to find a better paying job.

Gives employees confidence to step-up

Staff members only receive a paycheck every month, so they may not fully understand how vital their productivity is to the company. Without a basic understanding of finance and economy, they may think the company is doing well enough — so they’re not motivated to perform better or work towards higher goals. When you educate your employees towards mastering numbers, they can make informed business decisions and take on budgetary responsibilities. You can cultivate a more financially savvy workplace, and further tap into their unique skills and insights to grow the organization.

Photo credit - Mikhail Nilov