Everyone is familiar with the concept of literacy, which refers to one’s ability to read and write. It’s a skill that clearly has a huge impact on everyday life. But what people might be less familiar with is the idea of financial literacy, which is having the knowledge to make informed decisions about one’s financial situation – from budgeting to investing to saving.
Unfortunately, Australians have long struggled with financial literacy. A study found that only 50% of men and 35% of women were able to answer five basic financial questions correctly. The good news: there’s an opportunity for employers to step up and help improve the financial literacy of their employees. We explore how in this blog post.
The importance of financial literacy
Before we dive in, it’s important to establish why financial literacy is such a critical skill to invest in. The short answer is that financial literacy leads to better financial health. And there’s a lot of research to support the fact that poor financial health creates many problems for employees – from health problems to anxiety, which eventually leads in lost revenue for companies.
Let’s take a closer look at some of the statistics:
- Two in five Australian workers experience financial stress during their careers
- As a result, these employees take an extra 2.4 sick days per year
- 1 in 5 employees also admit to being less productive at work because of financial stress
- This costs Australian businesses an estimated $31.1 billion per year in lost revenue
Looking at these numbers, it’s clear that improving the financial literacy of employees should be a top priority for organisations.
Barriers to financial literacy in Australia
So what exactly is it that’s preventing people from being financially literate? We can generally attribute low financial literacy to a lack of access in three categories:
1. Education. By far the biggest barrier to financial literacy is a lack of access to financial education. To have the confidence to make smart financial decisions, one first has to be equipped with the knowledge to do so. Unfortunately, financial topics aren’t built into our education system, which means that many people reach adulthood without an understanding of how to manage their money or save for long-term milestones.
2. Tools. To improve financial literacy, it’s not enough to simply memorise information. That knowledge needs to be put into action. But employees may find themselves feeling overwhelmed or require some assistance to get started. That’s where access to financial tools – which can serve as the bridge that helps people go from having knowledge to taking action – may be useful.
3. Professional support. Finally, it’s important to recognise that financial topics are inherently complex – which is a large part of what makes financial literacy so difficult to achieve. This means that almost everyone could benefit from receiving professional support to help answer questions and guide their decisions.
In the next section, we’ll share a few recommendations to help lower the barriers to entry when it comes to these three categories.
How to help your employees build financial literacy
When it comes to your own employees, there are many ways you can improve their financial literacy. This will, in turn, help their sense of financial wellbeing and lead to decreased stress, boosted productivity, and less revenue lost for your organisation.
To increase access to education, consider offering financial wellness benefits that provide employees with the space to learn more about relevant topics. This can come in the form of online courses, in-person trainings, or even printed materials that your HR team puts together. The most important part is to make sure these educational resources are accessible to your entire employee population. Here’s how:
- Raise awareness. If employees aren’t aware that these educational resources exist, then they won’t use them. Throughout the year, send out reminders to employees – whether it’s through email, Slack, or in-person announcements – that make them aware these benefits are available to them.
- Offer various formats. Not everyone enjoys learning through an online course. Similarly, some people don’t enjoy reading through printed materials. So where possible, try to offer a variety of educational formats to match the specific needs of your employees. Better yet, consider using a survey to make data-driven decisions.
As we mentioned before, tools are a great way to encourage employees to take action on the financial knowledge they acquire. There are many types of financial tools you can offer your employees, such as real-time payments or budgeting apps to make money management easier. The tricky part, of course, is getting employees to actually use the tools you offer. Here are a few tips to improve adoption:
- Create incentives. Consider building in incentives for employees to use the financial tools that are available to them. For example, perhaps you can “gamify” the budgeting app so that every time an employee uses it, they collect points and can eventually win a prize of their choosing. Or you can incentivise more superannuation contributions by “matching” however much they add to their accounts, up to a certain amount.
- Make it social. Believe it or not, there are ways to make finances fun for your employees. One way is to make using financial tools a social experience. Create a financial health support group, which employees can voluntarily join to talk about their favorite tools or their personal finance goals. Or, with permission, share employee testimonials on the intranet or at the next all-hands meeting about how much they’ve benefited from using the financial tools provided to them. This may inspire others to adopt those same tools!
You can also offer professional services, such as financial advising or counseling, as part of your financial wellness benefits. You, as an HR leader, can also offer up your expertise on topics like salaries and retirement savings. Having access to an expert who can answer questions or explain tricky concepts is an effective way to improve an employee’s financial literacy. Of course, talking about money to you or a professional may feel uncomfortable for employees. To help, we have some recommendations:
- Normalise the conversation. Make finances a normal conversation to have in the workplace. To encourage this mindset: train your managers to openly answer questions about salaries; Host lunch and learn about financial topics; And encourage support groups where employees can discuss finances in a safe space.
- Have company leaders set an example. One of the best ways to encourage employees to have more conversations about finances is to have your company leaders set an example. For instance, have your CEO share that he or she also uses the company’s financial counseling resource. Seeing someone in a leadership position get help with their own financial situation may inspire others to do the same.
Financial literacy is so critical in determining the overall success, wellbeing, and productivity of your employees. As an organisation, you have the opportunity to unlock financial resources that they might not have access to otherwise. Start with one or two of our recommendations to help improve your employees’ financial wellbeing.
If you have any employees who are in need of support, be sure to check out Wellness@Work, a free hub designed to support HR and Australian workers by giving them access to free content.