Financial Literacy for Employees

Jun 15

Financial literacy is the degree to which a person understands how to manage finances. This includes investments, budgeting, general money management, and more. Being financially literate means making smart money decisions and having a clear understanding of how different aspects of finances affect one another.

In the US, there is a shocking lack of financial literacy. The National Financial Educators Council conducted a study to test the financial literacy of US adults. More than 17,000 people took the test, and only 48% got a passing grade.* According to the same study, only 17 US states require students to take a high school course in personal finance, and according to the NFEC, only 20% of teachers feel competent to teach it.*

From this data, it is clear that a lack of general education around finances has led to a major gap in financial literacy for children and adults. The impact of poor financial literacy extends beyond personal expenses and can have a negative impact on a person’s mental and physical health, their ability to perform at work, and their overall well-being.

There is a good chance that many of your employees are impacted by this nationwide uncertainty about finances. In this blog, we intend to highlight the impact that poor financial literacy can have on your organization and employees and offer resources and guides to help you and your team improve financial literacy across the board.

Financial Literacy and Mental Health

Mental health and financial literacy are directly related. The physical and mental toll that a poor financial state has on a person is tangible and troubling. According to a Salary Finance study, employees who have money troubles are 13.4 times more likely to have sleepless nights and 6.5 times more likely to have poor relationships with their colleagues.

Supporting employee mental health has been proven to improve performance and engagement. In our previous blog, Supporting Employee Mental Health, we discovered the importance of fostering good mental health for your employees and the direct results that these impacts have on your organization. Drawing from that blog:

Providing support for your employees' overall health is a direct link to supporting their mental health. Proper salary compensation is also a factor, as one is more susceptible to stress and anxiety when they are in economic turmoil. Here are some factors to consider while adjusting your holistic support strategy:

Review your overall compensation strategy. A 2022 Gallup survey revealed that an increase in benefits and pay is the number one factor that candidates and current employees want from their employers. Providing competitive pay and a holistic benefits package can have a huge impact on your team's mental health.
Review your benefits package and see if there are opportunities to add mental health resources such as counseling and therapy (virtual and in-person) to your plans.

While an increase in compensation is not a replacement for financial literacy among employees, it can be a compelling addition to the education process. If your employees are experiencing financial turmoil, there is a chance that your compensation plan could benefit from a refresh that includes higher pay in addition to financial education resources.

How Poor Financial Literacy Impacts Your Employees and Organization

Poor financial literacy can lead to financial troubles, debt, and confusion. When a person is preoccupied with their current financial state, it can consume their thoughts and actions both at home and in the workplace. These side effects have a direct link to your employee development, engagement, performance, and more.

According to a survey by Salary Finance, cash-strapped employees are 5.8 times more likely to miss deadlines and 4.9 times more likely to produce lower quality work than their financially stable colleagues. The study additionally found that poor financial wellness (and the lost productivity and increased turnover costs that result) accounts for, on average, 11% to 14% of an employer’s payroll expense.

These troubling figures highlight how major an impact poor financial literacy can have on your team and your company finances. Yet, according to Guardian, less than one-third of workers report having access to financial guidance benefits.

It is clear that improving the financial literacy of employees not only improves their personal well-being but also the financial and productive well-being of your organization. With that in mind, let’s explore the financial literacy education options that we have at our disposal.

How to Improve Financial Literacy Within Your Organization

If there is a theme to these HENSLEE blogs, it is to educate yourself and then educate your team. With the data found in this exploration, it is clear that poor financial literacy is a result of a lack of financial education in the US. We’ve put together a list of resources and methods that you and your team can use to begin the journey toward financial literacy.

Test Your Knowledge: The first step to improving your financial literacy is to know where you stand. Using tools like the Finra Financial Literacy Quiz, you can test your current financial literacy, compare it to the national average, and get a clear understanding of what areas you need to improve.
Ask for Employee Input: To best help your employees improve their financial literacy, you first want to identify their current understanding, as well as their goals. Consider conducting a voluntary anonymous employee survey that gauges your employees' financial literacy, the areas they most want to improve, and the education methods and resources they would be most receptive to.
Provide Resources: There are many financial literacy tools and courses that you can provide to employees. Whatever route you choose to explore, ensure that your employees know where to find their resources and how to take full advantage of them. Some options include:
- Hosting financial literacy courses with guest speakers.
- Providing and promoting the use of financial tools such as Mint, Quickbooks, etc. Many payroll providers include money management tools on the employee dashboard, such as Gusto.
- Creating a resource guide with links to financial literacy tests, glossaries, tools, and more. HENSLEE has created a Financial Literacy Resource guide that you and your team can use as a jumping-off point. You can download the guide from our resource list below!
Host Open Forums: Create a space for employees to ask questions of their HR and accounting team.

Summary

We hope that this exploration of financial literacy has helped to enlighten you on the importance of this skill and the dire need for its improvement across the US and beyond. Whatever factor motivates you, whether it is employee performance, mental health, engagement, or a combination of all the above, setting your employees up with the tools to improve their financial literacy is the right move.

If your company is interested in supporting financial well-being by restructuring your compensation strategy or cultivating better financial literacy through employee training, HENSLEE is here to help! Contact us here to get in touch and start the conversation.

Thank you, as always, for your support of HENSLEE. Be well, and make space and elevate! 🙌🏽