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Why Employers Should Offer Financial Literacy Programs

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    Financial literacy defines our ability to manage money through saving, budgeting and other skills. When done right, it sets us up for a successful future and readies us for uncertainty. It also helps protect your people’s holistic well-being. Read nine considerations for creating a financial literacy program in your workplace to help employees not just survive, but thrive.

    Earning money is one thing; successfully managing it is its own challenge.

    Without addressing financial health and the issues employees regularly face, engagement takes a hit. The Society for Human Resource Management found only 31% of employers offer nonretirement, monetary benefits like financial literacy programs.

    Companies need every advantage possible to turn the tide. After all, how can you expect employees to focus on work when they’re asking themselves questions like:

    • How am I going to afford this dental work?
    • I barely scraped by last month — what am I going to do?
    • My check engine light isn’t going to turn itself off, huh?

    Financial literacy programs equip people with the knowledge they need to go from struggling to thriving. Meanwhile, their peace of mind cascades into loyalty, engagement, performance and, ultimately, retention.

    What is financial literacy?

    Financial literacy defines our ability to understand and manage money, like through saving, budgeting, investing and other skills. By extension, financial literacy programs help employees navigate it by expanding their money management knowledge.

    Like a full-spectrum workout plan, financial literacy programs aren’t limited to one topic. Other helpful lessons involve:

    • smart spending
    • filing tax returns
    • balancing bank accounts
    • debt and credit management
    • first-time home buying

    Why is financial literacy important?

    Creating a valuable financial literacy program starts by breaking money management down to its bare bones. For example, an employee earns X, and then they choose to do Y with that income.

    That’s the heart of financial planning: choices. And your people face several interconnected choices for:

    • investing
    • spending
    • earning
    • saving

    Chosen correctly, we set ourselves up for a bright financial future and security against the unexpected. Unfortunately, newer generations lean toward instant gratification, according to financial literacy expert Nelson Soh. He finds Generation Z and millennials tend to make monetary decisions that yield a quick return, even during financial instability.

    That’s reality for many employees in this demographic. In fact, almost half of them (46% of Gen Z and 47% of millennials) live paycheck to paycheck, according to Deloitte. Plus, 23% of those generations doubt their ability to safely retire.

    Curbing this unsettling trend requires helping employees grasp every facet of their pay, no matter how seemingly small. After all, even basic financial concepts can escape people, like:

    • 401(k) matching
    • Social Security
    • Medicare
    • deductions
    • expense reimbursement
    • and more

    If employees lack a foundational understanding of how their pay is calculated, they can’t effectively budget for their future needs, whether for the short or long term. (A tool that lets your staff access their earned wages daily is great for engaging employees with their pay, which increases their financial literacy while boosting financial wellness.)

    True financial comfort is a far cry from the vulnerable position most people find themselves in. The unexpected layoff, illness or payroll error could cause them irreparable harm. Poor money management even can sabotage their chances at higher education if they try to take their career in a new or more profitable direction.

    When life’s uncertain, so is an employee’s ability to work consistently. Making matters worse, a study conducted by the  TIAA Institute  revealed only 1 in 3 members of Gen Z can pass a basic financial literacy test. Who do these employees turn to?

    Financial literacy programs give businesses a chance to educate the talent they’ve invested in and help those employees make more informed choices.

    How financial literacy affects work

    It’s no surprise financial issues impact mental health. Since last year, it’s grown significantly worse. MetLife found 48% of employees stress over money — up from 31% in 2022. How many of your people are in the same boat?

    Even if this pain has nothing to do with work itself, it still compromises an employee’s:

    • performance
    • engagement
    • commitment
    • contributions
    • relationships with co-workers

    Fortunately, you can help. Simply acknowledging the issues and checking in with employees demonstrates concern.

    Solidarity goes a long way in retaining talent through hard times. Research from McKinsey & Company reveals former workers cited not feeling valued at work (54%) and no sense of belonging (51%) as their top reasons for quitting. Empathy and recognition alone don’t establish a financial literacy program, but they’re nonetheless crucial to a healthy and supportive work culture.

    How to design a financial literacy program

    With so many options, it’s up to you to survey employees and identify the most valuable paths. Keep these phases in mind as you flesh out your financial literacy program.

    Conduct research and analyze data

    Finding the right financial literacy resources will take time. Making assumptions opens the door for bias and could do more harm than good. As you brainstorm ideas and narrow your top picks, consult legal counsel before rolling out anything.

    To avoid this possible pitfall, collect anonymous feedback from employees to help gauge their overall financial literacy and which issues worry them most. This will help you invest in content that speaks directly to their needs.

    Select your program elements

    With relevant topics in tow, start to consider and fine-tune your program. Consider and experiment with these nine options.

    1. Workshops

    Look into workshops led by financial experts to guide employees through the basics of financial literacy. You can schedule recurring sessions or offer one-offs — whichever speaks to your people more. Either route you take will help build their financial literacy and foster a sense of belonging with employees who share these struggles.

    2. External advisers

    Employees won’t always be comfortable talking about their finances in a group setting. Providing a financial adviser any of them can consult gives them access to candid, personalized advice.

    3. Online financial resources

    Direct employees to trustworthy resources available anytime, anywhere. Make sure the option you offer is accessible and comprehensive. The best platform will organize content by topic so employees can search quickly for the info they need.

    4. Financial wellness apps

    An extension of online resources, financial wellness apps simplify tracking:

    • expenses
    • savings
    • financial goals
    • bank accounts
    • credit card spending
    • and more

    Some even can link with employees’ financial institutions to keep their info in one convenient location. Demystifying money and streamlining data produces priceless clarity.

    5. Employee assistance programs (EAPs)

    People pressed by financial stress may find much-needed relief through EAPs. These programs come in many flavors, but all serve one purpose: To help employees overcome personal challenges. EAPs include:

    • advisers
    • counseling
    • day care services
    • basic legal assistance
    • and more

    6. Retirement planning assistance

    If your company offers 401(k)s or individual retirement funds, chances are they include an option for retirement planning assistance. Employees should be familiar with your company’s 401(k) representatives. In fact, some may even entertain workshops or informational sessions. Don’t be afraid to ask.

    7. Debt management support

    No one enjoys debt. And when it’s overwhelming, it’s a beast. Consider connecting employees with debt management specialists to help them:

    • understand their credit
    • improve their credit scores
    • create a game plan for tackling debt
    • save for the future

    8. Organize financial literacy challenges

    If something isn’t fun … gamify it! Organize quizzes, contests and other activities to reward employees for strong financial literacy. These initiatives can help improve their well-being and encourage team building.

    9. Interest groups

    We’re all in this together. People who share a desire to boost their financial literacy may enjoy an open, group discussion. Considering offering an employee-led space to formulate plans, showcase success stories and hold each other accountable.

    How Paycom helps champion financial literacy in your company

    Knowledge begets well-being. The ideal HR tech should prioritize employee needs and improve their understanding with an easy-to-navigate interface. Paycom’s single software offers tools to help employees understand their earning, deductions and everything that makes up their pay.

    Beti®, our employee-driven payroll experience, automatically flags payroll errors. Then, it leads your people to resolve those issues before payroll submission (and before a mistake has the opportunity to compound their financial stress). Beti helps employees understand their pay on a deeper level. Meanwhile, your HR pros can focus on developing your financial literacy program — not correcting payroll problems.

    Similarly, our benefits administration tool lets employees easily preview their enrollment choices, including their premiums and out-of-pocket costs. It even calculates the total impact of their selections on their take-home pay before they commit, with no need to consult HR.

    When employees do have questions, our Ask Here tool simplifies the process by automatically routing inquiries to the right person in the company to answer. FAQs can be answered through a searchable database, and HR’s able to link employees to resources relevant to their concerns. Once you’ve established your financial literacy program, it’s a great outlet for new hires to learn more about the support available to them.

    Our learning management software is built with employees in mind. It lets you easily build training modules and deliver microlearnings geared toward enhancing financial literacy, strengthening compliance and more.

    Explore Paycom’s single software to learn how it enhances your employees’ engagement, retention and financial literacy.

    DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.