Financial literacy is concerned with providing individuals with financial knowledge and helping them make better decisions (Hustron, 2010). Crises on average occur every seven years: 2008 mortgage financial crisis and COVID-19 health pandemic to name two recent ones. Personal finance and basic financial knowledge become even more essential during crisis periods. Consequently, employees are increasingly looking to their employers to provide this.
This article will discuss financial literacy in the workplace, its benefits, how to improve it and its impact on the workforce.
Why is financial literacy important?
The UK lacks financial literacy and there is a clear need for greater financial education. A study found that only 44% of organisations offer programs to help employees make more informed financial choices. Moreover, a survey of 2,000 British workers implied British businesses aren’t doing enough to support financial literacy (HR News, 2021). This is detrimental for employee wellbeing. Subsequently, a wellbeing strategy is essential to improve employee financial knowledge.
What are the negative implications of limited financial literacy among a workforce?
Financial stress can have a negative impact on the workplace. For instance, studies found that employees stressed about their finances say their money concerns are a distraction at work. Furthermore, this can lead to reduced performance. Additionally, 62% of employees asked stating monthly expenses as their biggest financial concern each month (Snell, 2017). Moreover, the financial burden leads to anxiety, depression and other mental health issues. Consequently, financial literacy can help break this rigorous cycle and increase workplace morale, business productivity and reduce costs.
How can financial literacy be improved?
Employers can guide their team to increase their financial literacy. For example, podcasts, workshops, financial management tools and reading recommendations can point employees in the right direction.
Interestingly, 40% of employees in a survey did not know the total value of their other benefits and rewards. However, employees ranked benefits the second most crucial factor after base salary when searching for a job (HR News, 2021).
Reward and recognition can help employees save money. Offering personalised employee benefits can contribute to financial and consequently mental wellbeing (Benton, 2021). To list a few: bonuses, pensions, health insurance, holiday, skills development, staff discount, employee vouchers, automated savings and employee reward schemes can all help boost sustainable financial development. Employee recognition for hard work will also increase employee loyalty.
Enhancing organisational financial literacy will lead to happier, healthier, more motivated employees.
Companies benefit from increasing employee financial literacy. For example, it leads to increased productivity, improved retention and contributes to improved profitability. Meanwhile, it reduces stress and lowers absenteeism stress (Nikolovska, 2021).
1. Greater focus and profitability
Improving an employee’s personal situation gives them a better frame of mind and enhances their productivity.
2. Reduces stress
Being in debt and financial pressure is stressful. Financial literacy eases this anxiety empowering employees with knowledge. Therefore, this gives employees skills to take control of their finances, understanding positive solutions and distinguishing them from dangerous ones.
3. Less absenteeism
Absenteeism is the practice of avoiding work. If employees can manage their stress and feel healthier and happier, this should lead to decreased absenteeism.
4. Enhanced retention
Providing benefits that few competitors do enhances employee engagement with the organisation and increases their loyalty. Personalised rewards and recognition can help employees make the most from their monthly pay (e.g., cashback, savings, pensions).
5. Employees upskill themselves
Further education is often expensive. Research found that 60% of workforces lack basic work skills (Nikolovska, 2021). Financial wellness intensifies the importance of continued education and gives employees motivation to upskill further.
Impact on the organisation
Overall, an employee financial wellbeing program can enrich employees with the necessary skills to make better financial decisions. Additionally, it can decrease their stress and improve their performance and productivity at work. A supportive culture is imperative to attracting the best talent and is key for organisational success.
To find out more about how Each Person can improve your financial literacy in the workplace, visit eachperson.com or contact us at [email protected]
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Benton, L., 2021. 5 Ways to Boost Financial Literacy in the Workplace – Liberty Mind. [online] Liberty Mind. Available at: <https://libertymind.co.uk/5-ways-to-boost-financial-literacy-in-the-workplace/> [Accessed 6 October 2021].
HR News. 2021. UK employers falling short on financial education, shows new research – HR News. [online] Available at: <http://hrnews.co.uk/uk-employers-falling-short-on-financial-education-shows-new-research/> [Accessed 6 October 2021].
Huston, S.J., 2010. Measuring financial literacy. Journal of consumer affairs, 44(2), pp.296-316
Snell, P., 2021. Teaching your staff personal finance skills | Insights & Expert Viewpoints. [online] KnowledgeBrief. Available at: <https://www.knowledgebrief.com/blog/teaching-your-staff-personal-finance-skills> [Accessed 6 October 2021