Ironically, one of the most pervasive forms of illiteracy in
America isn’t addressed by its educational system.
Financial literacy — the ability to understand and use
fundamental financial skills like budgeting, investing and planning — is
woefully undertaught and largely unappreciated.
Many Americans have never been taught how to handle money.
The average American correctly answered only 52% of the
questions on the TIAA Institute-GFLEC Personal Finance Index in 2021.
Moreover, the wealth gap in the United States is increasing;
at the beginning of 1990, 60% of the country’s net wealth was held by the top
10% of Americans.
By the third quarter of 2021, that share had increased to
69.6%.
From credit card and student loan debt to a lack of
investing knowledge, battling rising interest rates and confronting soaring
home prices, individuals are struggling to cope with some of life’s biggest
challenges — and they’re feeling very ill-equipped.
An Essential Skill
Financial security is a universally important goal, in many
ways equal in importance to education and health.
Given the centrality of financial literacy to lifetime success,
many wonder why schools are not teaching it.
Those past school age, however, realize the challenges in
catching up to a world in which personal financial decisions are increasingly
complex and consequential, especially with a lack of basic financial knowledge.
There is a growing sense that employers have the
opportunity, resources and even obligation to address the financial literacy of
their workforce.
According to the Bank of America 11th Annual Workplace
Benefits Report, 62% of employers feel an extreme sense of responsibility for
their employees’ financial well-being.
Many employers, in fact, are targeting financial wellness as
a means of helping to close the wealth gap — a key consideration in DE&I
(diversity equity and inclusion) initiatives.
BrightPlan’s 2021 Wellness Barometer Survey found that the
number one cause of anxiety among workers is money, with 65% reporting
financial stress.
The study also found that over 80% of employees want support
and guidance from their employers on personal finances — not only for
retirement and financial education, but also for financial planning, investing
and day-to-day money management.
Multiple Benefits
Workers of all ages, life stages, income levels, genders and
socioeconomic background, want and deserve access to financial wellness
education and resources.
And there is a direct business benefit to employers as well.
Financially stressed employees reported an average of 15.3
hours per employee of reduced productivity and engagement per week.
Taken to the national level, this leads to an estimated $4.7
billion in lost productivity for US employers every week.
(This assumes that there are 94,257,000 knowledge workers in
the United States, with an hourly wage of $35.53, based on a data from the Federal
Reserve Economic Dataset.
For more information, see the full report.
Companies that provide financial wellness as part of their
total rewards strategy can improve productivity, increase employee loyalty and
raise their ability to attract and retain talent.
In an era of high worker churn, the value of promoting
financial wellness cannot be overemphasized.
There is a role for investment and financial planning
professionals to play as well.
Increasing financial literacy creates benefits for everyone,
clients and advisors alike.
By incorporating the latest literacy practices and extending
those areas of expertise to growing businesses in their communities, planners
can build a competitive niche while raising the awareness of the need for sound
planning.
Multichannel and Holistic
So what are the best ways to provide financial literacy to
workers? To begin with, there must be more to the initiative than a one-time
educational opportunity.
Solutions must be actionable, relevant and ongoing to be
effective.
They must be promoted and available to every employee, at
every level, built for the long term and focused on closing the gap between
knowing and doing.
Multichannel experiences are important.
Employers should consider a program that includes financial
wellness apps, webinars, access to financial coaches, and in-person workshops
where and when possible.
Online dashboards and mobile apps provide a home for
financial health assessments, calculators and other useful tools that deliver
insight and analysis of progress into the person’s financial goals.
What’s more, digital financial coaching makes it possible
for employees to work on their plans anytime, according to their own schedule,
and provides real-time insights.
Apps have other benefits as well, particularly in their
ability to customize to the individual.
Some employees are focused on debt repayment, others on
saving for a home or college; still others are nearing retirement or seeking an
investment strategy.
A good financial wellness app will support employees at
every stage of life, providing them with the tools and information specific to
their current situation and future goals.
In addition, financial planners play a crucial role in a
company’s financial education program.
To see the most value in their program, companies should
take an integrated approach with both digital and human elements.
Utilization tracking, another advantage of digital
solutions, helps to document the effectiveness of literacy training as part of
the company’s overall well-being efforts.
Finally, all financial literacy programs must conform to a
fiduciary standard that ensures independent, objective and certified
information, delivered at all times in the employee’s best interest.
Universally Important
It might seem that only large employers can afford to
accommodate financial literacy as an employee wellness benefit, but this isn’t
the case.
Thanks to advances in financial education offerings,
companies of all sizes can and should consider programs for financial success.
The best programs are customizable to each individual,
long-term in scope, and integrated so that employees can see and track all
their financial interests.
Most of all, they must be made available to everyone in the
organization.
Whether someone has $10 million in net worth or is on the
brink of bankruptcy, they are all deserving of financial literacy.
As a way to keep employees satisfied and productive, looking
at financial wellness from a holistic perspective is something every employer
needs to be doing.
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