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How to cultivate employee financial literacy

Written by: Chase Charaba
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Published on May 5, 2022.

Many Americans aren’t taught financial literacy or planning in school. This has led to an increase in financial illiteracy across the country.

According to Standard Poor’s Global Financial Literacy Survey, only 57% of adults in the United States are financially literate. This lack of financial education and America’s rising personal debt for student loans, car repairs, and medical bills have left many in a bind.

This combination of excessive debt and financial illiteracy can create stress and decrease an employee’s ability to focus on or engage in their work properly.

Employers can help mitigate the consequences of financial illiteracy by providing financial education and guidance and offering employee benefits.

This article will explore how to cultivate employee financial literacy through employee benefits.

What is employee financial literacy?

Financial literacy is the understanding of and the ability to use financial skills such as finance management and budgeting. It encompasses everything related to personal finances and investing, like taking out loans, retirement planning, saving money, and paying bills and other expenses.

Those who are financially illiterate often have a harder time understanding how to save money, plan for retirement, and balance their budget, leading to increased stress and uncertainty.

Employee financial literacy programs, also called financial wellness programs, help teach your employees to make informed decisions about their finances. Your employees can walk away from a financial wellness program with a better understanding of their financial situation, how to manage income and expenses, and how to build their financial security.

Why should you put in the time and effort to introduce financial wellness into your employee benefits package? Improving your employees’ financial literacy can help your organization in several ways, which we’ll explore in the following section.

Why is employee financial literacy important?

Financial literacy can help your employees plan for their future and remove potential stressors and feelings of uncertainty that often carry over into the workplace.

Your employees need to understand how to navigate some of the most significant decisions they’ll make in their lives, such as investing in their retirement and purchasing real estate.

The Federal Reserve found that 25% of Americans have no retirement savings. Fewer than 40% of respondents felt that their retirement was on track, which can be a major stressor on employees.

Financial responsibility for individuals is also increasing. In the past, people would primarily pay for goods with cash. Employers might also have provided a pension plan for retirement, which requires no involvement from the employee. Today, employees need to know how to navigate loans, manage credit card debt, and set up retirement plans such as a 401(k).

What are some of the benefits of improving financial literacy?

Improving employee financial literacy can also have a significant impact on your organization.

Benefits of improving employee financial literacy include:

  • Improved focus and productivity at work
  • Reduced stress, leading to improved wellbeing
  • Less absenteeism
  • Improved employee retention

Many employees admit to being distracted by their finances while at work. According to PwC’s 8th annual Employee Financial Wellness Survey, one-third of employees are distracted by finances at work, with 49% of those employees saying they spend three or more hours at work each week thinking about or dealing with issues related to personal finance.

If you pay your employees the U.S. average wage of $55,628, you could be paying employees $4,173 each year to be distracted by their personal finances.

When employees have a better understanding of how to manage their finances, they can take steps toward improving their situations. When they don’t need to worry about their finances during the day, they’ll be able to focus more on their work, improving overall productivity.

Empowering your employees to improve their personal finances can reduce stress, improve employee well-being, and reduce healthcare costs. Healthy employees are less likely to be absent due to health problems.

When employees deal with challenging financial situations, they are more likely to be absent to deal with them. PwC’s Employee Financial Wellness Survey found that 10% of employees said their financial worries had affected their attendance at work. Helping employees overcome their financial hardships with financial wellness programs and employee benefits can reduce how often employees are absent for financial reasons.

An employee financial wellness program is a crucial employee perk that can affect recruitment and retention. Employees who see the value of your financial wellness program will be more likely to stay at your organization instead of pursuing other opportunities.Are you looking for more employee retention tips? Download our guide for 11 retention strategies!

How to set up an employee financial wellness program

The most effective financial wellness programs are both personal and comprehensive, providing each employee with a complete picture of their particular financial health and support for taking care of short-term and long-term needs.

Such programs should help employees create financial plans and provide tools for managing those plans. Important topics to address with employees include health insurance, budgeting, building an emergency fund, improving credit, and saving for retirement.

Here’s how to set up an employee financial literacy program.

Step 1: Establish goals for your financial wellness program

The first step to a successful financial literacy program is to identify what you want to accomplish with the program.

Is your goal to reduce absenteeism or improve productivity? Or do you just want to provide your employees with an additional incentive to stay with your organization?

Determining your goals for the program can help you measure the results over time.

Step 2: Determine what your program will cover

Now that you have your goals, you need to decide what topics your financial wellness program will cover. A good starting point is to ask your employees which topics would be most valuable to them. You can do this with an anonymous survey.

You can also use any employee data or knowledge you already have to build your program. If you have many college-educated employees, you may want to offer resources for managing student loans, for example.

Step 3: Design the program

With your topics selected, it’s time to design the program. How will you provide information and resources to your employees?

You can use a third-party employee financial wellness program or set one up yourself. Employee financial literacy programs can take many different forms, including classes, online groups, or one-on-one meetings with professionals.

Popular components of financial wellness programs include:

  • Digital portals with tools and content
  • Providing interactive tools like calculators and charts
  • Access to financial advisors
  • Classes and seminars
  • Financial planning

You’ll also need to decide if your financial literacy training will be optional or mandatory for employees.

How offering employee benefits can reduce your employees' financial strain

Establishing an employee financial wellness program isn’t the only way that you can support your employees financially. Providing employee benefits and increased compensation can help your employees live more comfortably.

There are many employee benefits options available other than salary increases. You can offer your employees health benefits, wellness programs, flexible schedules or remote work, and retirement benefits, to name a few examples.

Offering health benefits

Medical bills and health insurance are two of the largest contributors to personal financial struggles. People often don’t have enough money saved to cover surprise medical expenses or emergencies.

Offering traditional group health insurance gives your employees access to coverage so that they don’t need to purchase their own individual health insurance policy. However, it can come with a hefty price tag for organizations.

Thankfully, more personalized benefits options are available that save your organization time and money while giving your employees more freedom over their health benefits.

Health reimbursement arrangements (HRAs) allow organizations to reimburse employees for their qualifying medical expenses tax-free. This can include individual health insurance premiums and out-of-pocket medical expenses.

Some of the most popular HRAs available are:

You could also offer your employees a health stipend instead of group health insurance. Health stipends work similarly to an HRA, except the reimbursements are taxable.

While HRAs are often a better choice for organizations, health stipends are a great option if you have employees who receive advance premium tax credits (APTC), as they’ll be able to use their health benefits without affecting their APTC eligibility.

Offering your employees a health benefit can help them save money on their healthcare costs, contributing to their financial wellness.

Offering wellness benefits

Financial wellness programs are sometimes offered as part of a holistic employee wellness program. Seeing as financial illiteracy and financial situation can lead to increased employee stress, offering wellness benefits are a great way to promote healthy living without incurring additional expenses upon your employees.

A taxable wellness stipend enables you to reimburse employees for their wellness expenses such as gym memberships, exercise equipment, meditation apps, fitness classes, and more. This allows your employees to live healthier lives and de-stress, improving productivity in the workplace.

Wellness stipends are especially helpful to your employees who already pay for memberships or subscriptions, as they’ll be able to get those costs reimbursed, contributing to their financial wellbeing.

Design your own employee wellness program with our free guide to employee wellbeing

Offering remote work benefits

Allowing your employees to work remotely can also significantly improve their financial wellbeing. When employees work from home, they don’t need to commute to the workplace. This saves them from buying as much gas for their vehicles or using public transportation, helping them save money each month.

If your employees work from home, you can also provide them with a remote work stipend. This allows you to reimburse them for their home office setup costs, internet access, and cell phone bills.

Conclusion

When offering employee benefits, organizations should include a financial literacy program. These programs can help your employees create and maintain financial plans according to each employee’s distinct needs. When your employees are in a better financial position, they’re less likely to be stressed at work, enabling them to be more productive and positive in the workplace.

You can also provide employee benefits such as HRAs or employee stipends to contribute to your employees’ financial well-being.

If you’re interested in offering health, wellness, or remote work benefits to your workforce, PeopleKeep can help. Our HRA and employee stipend benefits administration software makes it easy to set up and manage your benefits.

Scheduled a call with a personalized benefits advisor to see how employee benefits can work with your organization

This blog article was originally published on June 17, 2016. It was last updated on May 5, 2022.

Originally published on May 5, 2022. Last updated May 5, 2022.
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