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 Financial Education Empowers Employees
to be More Productive

 


Key Question Topics:

  1. What Will a Quality Financial Literacy Program Accomplish for Employees?
  2. What are the Top Ten Financial Behaviors?
  3. How Can Employers Help Employees Improve Their Personal Financial Behavior?
  4. Where Should an Employee Financial Education Program Begin?
  5. Should Financial Education Be an Employee Benefit?
  6. Will a Quality Financial Literacy Program Improve the “Bottom Line?”

Companies providing financial education show Improvement in workplace including increased productivity, employee morale, and company loyalty and decreased healthcare costs, absenteeism, turnover, workplace distractions, and operational risk across the company. Financial education programs have the effect of contributing to the company’s bottom line between $3 and $4 for every dollar spent.

What Will a Quality Financial Literacy Program Accomplish for Employees?

A quality financial literacy program should help your employees practice good financial behaviors. Over time these behaviors will result in positive changes in their financial lives. The changes include increased assets, decreased liabilities, increased net worth, reduced financial distress, and improved financial and overall wellbeing. As a result they will be better able to reach their financial goals including a successful retirement. A quality workplace financial program should provide employees access to help with their overall financial fitness at every stage of their careers. This helps employees live better financial lives as well as maximize savings for retirement. People can get ahead financially only by sacrificing some current spending to save and invest and by practicing good financial behaviors.

What are the Top Ten Financial Behaviors?

There are many good personal financial behaviors but the most fundamental truth is that one must spend less than one earns, thus sacrificing some spending to invest for one’s future. Additional good financial behaviors include:
 

  • Establishing measurable financial goals and realistic plans to achieve them;
  • Building and maintaining an emergency fund equal to three months of take-home pay;
  • Using a budget to control spending for regular and irregular expenses;
  • Maintaining adequate insurance for property, liability, life and health exposures;
  • Paying credit card charges in full every month and keeping non-mortgage debt payments below 15 percent of disposable monthly income;
  • Saving for retirement through an employer’s tax-sheltered plan at least the amount required to obtain the largest matching contribution and with a Roth IRA account if an employer’s plan is insufficient to achieve a secure retirement;
  • Leaving retirement money where it belongs in retirement accounts prior to actually retiring;
  • Recognizing that the closer one is to a financial goal that less risk should be taken, and conversely;
  • Preparing, and updating as needed, a will, advance directive documents and beneficiary and ownership designations on all financial accounts.

How Can Employers Help Employees Improve Their Personal Financial Behaviors?

Many employees realize that they have some financial behaviors that need changing. To succeed they must believe that they can successfully change those behaviors, and they must have a plan to change. Employers can help by giving employees easy access to quality financial programs. Such programs go well beyond simply explaining an employee benefits package and address the key decisions that must be made and how to integrate employee benefits into the broader pattern of good financial behaviors.

Where Should An Employee Financial Education Program Begin?

Financial programs should be based on the level of employee financial distress. The suggested topics for a quality financial program are listed below. The topics should differ based on employees’ reported level of financial distress.

High financial distress/Poor financial wellness
  • Setting financial goals
  • Individual budgeting, credit education, and credit recovery counseling
  • Benefits Information
  • Credit union and bank affiliations providing preferred services to employees
  • Coaching in how to begin preparing for a financially successful retirement.

Average financial wellness/average financial distress
  • Benefits Information
  • Credit union and bank affiliations providing preferred services to employees
  • Money coaching on critical wealth management practices
  • Tax preparation education
  • Mortgage lender education for achievement of homeownership goals
  • Insurance education
  • Investment education and advice
  • Retirement planning education that explains the various components of post-work income and how to continue preparing for a financially successful retirement
  • Estate transfer workshops
  • Post-retirement financial education

High financial wellness/low financial distress
  • Retirement planning education that explains the various components of post-work income and how to continue preparing for a financially successful retirement
  • Money coaching providing direct education on critical wealth management practices
  • Investment advice
  • Tax preparation education
  • Estate transfer workshops and individual counseling
  • Post-retirement financial education

Should Financial Education Be An Employee Benefit?

The employer's benefits package is at the very core of financial success for an employed person. Those who make wise choices among benefit options save money, reduce income taxes, and increase retirement savings while securing benefits that genuinely fit their needs. Such decisions lead to better personal money management behaviors that maximize the likelihood of financial success throughout their lives.

However, financial stress and the lack of basic financial literacy are the major reasons why employees do not make wise choices among benefits options. Research shows that 30 million American workers – 1 in 4 – report they are seriously distressed and dissatisfied with their financial matters … and this spans across all income levels. Financially unwell employees do not make the best decisions for themselves regarding retirement planning, pre-tax health and dependent care and other employee benefits.

What Financial Education Resources are Available to our Business or Organization?

Check out “Resources” on these websites:

Click here to view a 6-minute video.

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