Did you know that as high as 83% of human resource professionals admit to having personal financial challenges and stress, often due to a lack of personal finance knowledge, and that these challenges are significant enough to affect their work productivity? This is according to a 2018 SHRM report.
The study's results are over 4 years old, meaning they’re a bit dated. However, given the economic hardships precipitated by the 2020 COVID-19 pandemic and the ensuing global recession, we can rightfully assume that millions of employees are under immense financial strain and challenges. That is why employers should feel innately motivated to do more to offer their employees personal financial literacy education.
This article highlights some outstanding business benefits employers stand to gain from offering their employees personal finance education and literacy programs:
3 Business Benefits of Employee Financial Literacy Programs
The first benefit of offering an Employee Financial wellness Program that teaches employees sound financial principles they can apply to their finances is that it:
1: Reduces workplace and personal stress
As the 2018 study mentioned earlier shows, most employees are under high financial stress that distracts them from work. The connection between the two makes sense because constantly thinking of unpaid bills, future expenses, and unmet financial desires takes a lot of mental power, which can lead to lower productivity.
Financial literacy programs make employees confident in their ability to manage their finances well, which reduces their stress, especially when they save enough to handle personal emergencies.
Financial Literacy Programs empower employees and reduce their financial stress by showing them how to:
- Save a percentage of their income: This provides something to fall back on in an emergency and gives employees a sense of security that helps them manage financial stress levels.
- Invest savings: Financial literacy programs teach employees how to invest their incomes and let money work for them, which keeps them from borrowing more, and provides a more pronounced sense of financial well-being and security.
Since stress is a major contributor to poor health, financial literacy helps reduce stress levels, which means fewer visits to the hospital and reduced medical costs, all of which lead to more focus at work and improved productivity.
2: It makes employees more financially honorable
Unfortunately, in a bid to become more financially stable, many employees resort to unconventional approaches such as:
- Increased borrowing and lending between colleagues; as you know, when employees borrow from each other but fail to repay each other, it can create a hostile work environment.
- Embezzling funds from clients or company accounts with the hope of refunding at a future date.
- Breaking confidentiality agreements by selling business information.
In contrast, when employees know how to manage their finances well, save, and invest, they’re less likely to engage in habits that compromise their integrity. Employees who maintain high integrity when handling business matters create a healthy and productive work culture that allows a business to thrive.
3: It leads to better credit utilization
Over Utilizing credit is one of the surest ways to fall into colossal debt because “the imaginary money” makes it easy to make whimsical purchases that are often poor financial decisions.
Fortunately, even though credit cards never come with a manual, offering an in-house financial literacy program can help employees learn how to utilize their credit better and use credit to their advantage by teaching them things like:
- The importance of only charging purchases they can afford with the money in their bank account. Financial literacy can help employees understand that the money on credit cards is not a free pass to buy whatever they want because they still have to repay that money, plus interest.
- Stay below the credit limit. Most financial literacy programs have a credit utilization segment that teaches financial principles meant to help one stay below their credit utilization of 20-25% to boost credit scores.
- Compare different credit cards. One importance of credit card comparison is understanding the benefits of each card. When employees understand that each card has features that favor the holder, they can determine which credit line to utilize to improve their credit score and financial standing.
Knowing the benefits of financial literacy isn’t the same as actually practicing those habits every day. As an employer, you should create a culture where you provide literacy programs and follow up on how well employees implement the principles they learn.
By giving employees this one thing, you can improve their job satisfaction and financial well-being, thereby improving their workplace productivity.