Aside from the personal rewards for employees, the business case for financial education is strong.
The goal of boosting financial literacy isn’t to turn your entire workforce into accountants and financial gurus. Finance experts and professionals are just a call away if you need help with complicated money matters.
Training staff to be financially literate builds on foundational skills, such as managing cash flow, planning ahead, understanding profits and losses, which ultimately impact your bottom line.
Knowing the reality of profit and costs, employees are more likely to understand your business, their job roles, workload, and their salary better.
The three questions below are used as a global benchmark for financial literacy. Scroll to the bottom of this article for the answers.
Financial literacy litmus test
Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years, how much do you think you would have in the account if you left the money to grow?
(a) More than $102
(b) Exactly $102
(c) Less than $102
Imagine that the interest rate on your savings account was 1 per cent per year and inflation was 2 per cent per year. After one year, how much would you be able to buy with the money in this account?
(a) More than today
(b) Exactly the same
(c) Less than today
Please tell me whether this statement is true or false: “Buying a single company’s stock usually provides a safer return than a mutual fund.”
1. Financial education is an employee perk
Make sure your staff knows about the benefits you provide. Financial education is an employee perk, and reminding staff that this is a life-long lesson they can use in any role and in their personal lives is a good idea.
According to Jeff Vijungco, vice president of global talent at Adobe, employers need to re-examine what they consider as employee perks. “Employers may be focusing too much on ping pong tables and free dry cleaning, instead of technology that helps their employees feel motivated, valued and productive,” he said.
“Employers need to pay attention to productivity more than perks, and realise that their employees are happy to work when a company invests in their success.”
The more your employees understand what you are offering them, whether that be enhanced pensions contributions through to EAPs or wellbeing programmes, the more value the employee (and consequently the company) will get from them.
2. Help your staff to retire when the time is right
Employers should want their employees to be in a sound financial position that enables them to make an active decision about when to retire.
If an employee feels resentment because they have insufficient savings to step down, they may be unproductive or lack enthusiasm. Financial education enables staff to understand the importance of pensions (or equivalent) savings vehicles.
3. Improve employee wellbeing
Financial anxiety can quickly lead to stress, and stress is one of the biggest causes of employee absence.
By offering financial education, employees can feel less stressed about their finances, more supported and motivated to take control of their own financial situation today and also to plan for the future.
4. Tackle short-term rewards culture
Offering pensions, group risk and healthcare benefits are significantly more valuable but often perceived as less glamorous than shopping vouchers or discount codes that could be offered by competitors.
Unless you explain the differences and the longevity of the more robust employee benefits, some employees may be lured towards handbags and holidays which won’t help their longer-term financial situation.
5. It’s fun
“If delivered in the right way, financial education is surprisingly good fun too. Whilst this may not pass muster with senior management as a tangible reason to offer it, employees who feel their employer takes an interest in their situation outside of work as well as in it, are proven to be more committed,” says Katie Vye, senior money at work consultant at Jelf Employee Benefits.
Historically very few people received any financial education at school and if they did, the emphasis was unlikely to be on making it enjoyable. However, insights from workshops show that when financial education is targeted, relevant and with specific outcomes, it is an extremely positive experience for employees.
Answers to the mini-quiz