When you think about creating a healthy company culture, do you include employees’ financial well-being?
A PwC survey from May 2020 found that for 54% of America’s workers, financial matters or challenges are the largest sources of stress. That number has surely gone up since then, as the economic effects of the COVID-19 pandemic continue to reverberate.
In short, when it comes to financial wellness, America’s workers aren’t feeling well.
So, what impact does that have on employers? A 2019 survey by Salary Finance 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.
Fortunately, implementing a financial literacy education program in the workplace can benefit companies and employees by relieving stress, increasing productivity, aiding recruiting, and retention, and even improving employees’ business acumen.
Let’s look at each benefit.
Financial Literacy Benefit #1: Relieving Employee Stress
As noted above, too many workers are stressing over their finances. As numerous studies have shown, this kind of stress often results in physical symptoms like high blood pressure, digestive issues, sleep problems, migraines, and muscle tension. Perhaps most worryingly, financial stress can lead to an avoidance of medical care. The World Health Organization has called stress the "health epidemic of the 21st century" and estimates it costs American businesses up to $300 billion a year.
Helping employees feel more secure about their finances is key to lowering employees’ stress, and that’s where financial literacy education comes in. Financial literacy gives employees better awareness and understanding of how money works and how to handle it responsibly. For example, employees can learn how to create a budget, manage and pay off debt, save for a long-term goal like buying a home or build a retirement nest egg.
When a lack of control increases stress, financial literacy education can reduce it. When asked in the PwC 2018 Employee Financial Wellness Survey to complete the sentence “My employer financial wellness program has helped me…” respondents said:
41% got their spending under control
39% prepared for retirement
31% paid off debt
27% saved for major goals (home, education)
23% better managed their investments/asset allocation
12% better managed healthcare expenses or saved for future healthcare expenses
These measures are proven to reduce employee stress. Employee Benefit News reveals in their study, the percentage of participants who felt “highly stressed” about personal finances dropped from 52.4% to only 19.2% after the completion of a financial wellness program. Similarly, 56% of participants said they believe they’re in a better position to manage their monthly cash flow after the completion of a financial wellness program.
Financial Literacy Benefit #2: Increasing Productivity
It makes sense that employees can be more productive when they aren’t preoccupied with money worries, and the data confirms it. A 2020 study by the Global Financial Literacy Excellence Center (GFLEC) found that employees with poor financial literacy can spend as many as six hours during the workday per week thinking about or dealing with issues or problems related to personal finances.
According to the Salary Finance survey, a cash-strapped employee is 5.8 times more likely to miss deadlines and 4.9 times more likely to produce lower quality work. Another issue is presenteeism, which primarily refers to low work quality due to coming to work while sick but can also refer to a state of chronic distraction, where the employee’s mind is not on their work.
The GFLEC study concluded, “Improving employee productivity by decreasing the amount of work time lost to personal finance issues is a primary motivation for employer-sponsored financial wellness programs, and addressing low financial literacy should be a key element of such programs.”
Financial Literacy Benefit #3: Aiding Recruitment and Retention
Wellness programs are high-value benefits that today’s employees are looking for. Employee benefits company benefitexpress describes financial wellness programs as “a prime indicator of your company culture and investment in your employees, which could aid in standing out against competing companies in today's saturated market.”
These programs are important for employee retention because according to Ceridian’s 2018-19 Pulse of Talent Report, 37% of American employees are actively or casually looking for another job, and another 36 percent would be willing to consider another job if someone approached them.
Showing employees you care about their financial well-being has become table stakes for companies. Financial Health Network research revealed that, “currently, less than one-third of employees report having access to any given financial guidance benefit, even though a majority of employees express interest in these benefits.”
We learned from the 2019 PwC Employee Wellness Survey that “44% of employees believe their company cares about their financial health, and both millennials (81%) and Gen-Xers (75%) would be willing to change companies to find one that cared more. Even half of Baby Boomers say their loyalty is influenced by how much a company cares.”
Adding financial literacy education is a powerful way to show candidates and employees that you care about their financial well-being.
Financial Literacy Benefit #4: Better Employee Business Acumen
In a National Financial Capability Study, only 34% of individuals in the U.S. can answer four or five questions on a basic five-question financial literacy quiz correctly. And yet, how many of the remaining 66% have some level of budgetary management responsibility at work? Probably more than you’d think.
The American Management Association believes that “The ability to understand and decipher the interplay between numbers, people, process, and technology on a global dimension and scale is critical in today’s ever-changing global economy,” and that “Mastering the numbers enables you to make sound and quick decisions.”
Harvard Business School identifies five ways that financial literacy can help employees in business:
- Understanding the impact of actions on the broader organization’s financial health.
- Making more informed decisions by approaching problems with a new toolkit.
- Advocating for team budgets by proving the impact on your company’s bottom line.
- Mastering financial literacy to thrive at the negotiation table.
- Becoming financially efficient by understanding how team expenses play into the liabilities on your organization’s balance sheet.
Financial literacy education can unlock these skills for employees. An International Foundation of Employee Benefit Plans survey found that employees were more financially savvy in 61% of workplaces where there was a financial education program in place.
When employees walk through your doors, they bring their financial concerns with them. In addition to ensuring you’re paying them at a fair market rate, providing employees with financial literacy education helps them gain better control over their finances. Less stressed, more productive, more engaged, and savvier employees? That makes dollars and sense.
Share this on social: