• As we celebrate Financial Literacy Month in April, there’s no better time to bring employee financial stress under the spotlight.
• Financial literacy is the path to establishing long-term, sustainable financial wellness.
• Employers can empower people to achieve financial wellness by augmenting their employee benefit programs with accessible educational and financial resources.

Financial Literacy Month was established in 2004 to recognize the importance of teaching individuals fundamental financial concepts such as budgeting, borrowing, taxation, and other aspects of personal financial management. Research indicates that approximately 66% of Americans lack these skills, resulting in a widespread lack of financial literacy. Let’s explore why financial literacy is pivotal in fostering a healthy and robust workforce.

The Components of Financial Literacy

Financial literacy means having the skills and knowledge to manage money and debt effectively. The core components of financial literacy are:

1. Budgeting. Sound budgeting can help people save for major purchases and maintain healthy savings habits.
2. Borrowing. Almost everyone has to borrow money at some point, but responsible borrowing requires understanding interest rates, compound interest, payment periods, and loan structures.
3. Taxes. Income is taxed differently depending on its source – tax rates on income from employment, investments, rentals, and inheritances are very different.

The Link Between Financial Literacy and Financial Wellness

Financial literacy and financial wellness are like two sides of a coin. Being financially literate puts your workers in a better position to deal with financial roadblocks, making them less likely to experience economic distress. Financial literacy allows them to:

• Make better financial decisions
• Effectively manage their money and debt
• Reach financial goals
• Reduce and regulate their expenses
• Experience less financial stress and anxiety that could manifest on the job

A study on financial literacy and its relation to financial well-being concluded that insufficient financial literacy could lead to unwise financial decisions, resulting in negative financial consequences for individuals. Those who are financially prepared tend to handle financial challenges, such as personal bankruptcies, health issues, early retirement, job losses, debt repayment, and stress more effectively than those who lack financial preparedness. Consequently, financially prepared individuals tend to attain greater financial well-being than financially ill-prepared individuals.

Financial literacy primarily concerns financial knowledge, while financial wellness is all-encompassing and refers to a person’s finances. It’s unlikely that your employees will achieve true financial wellness without first achieving a sound level of financial literacy.

Are Financial Worries Keeping Your Employees Up at Night?

The short answer is “yes.” A recent PwC survey outlined the degree to which American workers are struggling financially:

• More than half of full-time employees feel stressed about their finances
• Two in five full-time employees say their top financial pressure is that everything costs more these days
• Only 42% say their compensation is keeping up with the rising cost of living expenses, down 10% from the previous year

Boosting Financial Literacy Through an Employee Financial Wellness Program

If your employees have ever asked for financial assistance, you know how awkward these conversations can be, especially if you can do little to help. Financial wellness benefits can address this problem and provide a win-win solution for both employees and employers:

• Most employees (82%) say they’d like to be more confident in making financial decisions.
• Almost 9 in 10 believe it’s important for employers to offer a financial wellness program.
• Three-quarters say financial wellness programs help reduce their financial stress.
• 66% say a financial wellness program improves their company loyalty.
• More than half say a financial wellness program increases their productivity.

If you’re among the 97% of employers that feel responsible for your employees’ financial wellness, here are five steps to guide you through setting up a financial wellness program:

1. Understand Your Employees’ Financial Situations

Financial challenges can quickly appear in the workplace, so look for the signs. These can include requests for pay advances, early retirement plan withdrawals or loans, and transportation trouble, which may manifest as absenteeism.

2. Assess Their Financial Wellness Needs

Ask employees what they want to see in a financial wellness program. A confidential survey is an effective way to gain these insights. 

3. Review Your Benefits and Include Diverse Resources and Tools

Assess your benefits package and ensure that it includes diverse resources and tools that cater to the distinct financial needs of your employees. A well-rounded program could include free counseling sessions, budgeting, and savings tools, and on-demand pay.

4. Communicate and Implement Your Solution

Before launching any program, ensure your staff is ready by communicating via emails, all-hands meetings, company intranet, monthly newsletters, or weekly team huddles. Post-launch, keep communicating and reminding your workers to use the benefits as they need them.

5. Measure Success and Improve Iteratively

Set up regular feedback loops that allow you to find out what your employees like about your financial wellness program and how they think it could be improved. You can then make informed decisions and enhance your program’s success.

Time to Move

Today’s financially strained workers are looking for a plan and want your help getting on track. There’s never been a better time to introduce financial wellness programs that prioritize financial literacy and are tailored to employees’ financial journeys and life paths.

Learn more about Payactiv’s free or low-cost Financial Wellness benefit today.