The country is experiencing an unprecedented economic downturn that has left nearly 36 million people unemployed with little hope for what their financial future holds.
Even before the pandemic, about 40% of people did not have the cash available to cover a $400 emergency and up to 78% of people reported living paycheck-to-paycheck. What’s more troubling is 74 million Americans have more credit card debt than emergency savings, according to a survey from Bankrate.
After the onset of the Great Recession in 2008, the idea of financial education was reinvented and reintroduced to the public to deal with the economy’s shortcomings at the time. With COVID-19, how will we spin a new era of financial literacy for years to come?
Understanding Financial Literacy
One of the key elements to achieving financial health is through financial education. That may seem like a no-brainer, but when it comes to finances, many people don’t consider themselves experts.
So, what exactly does it mean to be financial literate? It’s the ability to understand and effectively apply various financial skills such as:
- Personal financial management
- Budgeting
- Knowing how and when to use credit
- Smart investments
It’s actively improving your knowledge about your own personal finances and creating healthy habits that will eventually lead to your financial freedom and a comfortable financial future.
Financial literacy helps individuals become self-sufficient so that they can achieve financial stability for themselves and their loved ones. It’s a tool to help navigate tough financial decisions and to avoid becoming victim to predatory financial practices.
Why Employers Should Be Concerned
Now more than ever, it’s important for your employees to understand their financial health and to curate a road map for their financial future. Some may even argue that being financially literate is one of the most valuable financial assets a person can have.
Debt, unexpected medical expenses, rent, and unpaid bills can easily pile up and destroy someone’s financial health if they don’t have a steady cash flow, their spouse has recently lost their job, or they’re experiencing reduced working hours. This nightmare is becoming a reality for many Americans who are facing emergency expenses with no savings.
So, why should you as their employer care?
Research has proven the lack of financial literacy among employees is high. Less than a third of Americans have a financial plan in writing and this lack of strategy leads to a higher chance of future financial stress.
According to a recent report by Thriving Wallet, financial stress has a major impact on American lives:
- 90% say that money has an impact on their stress level
- 65% feel like their financial difficulties are piling up so much they can’t overcome them
- 40% wish they could have a ‘fresh’ financial start
This overwhelming feeling of stress negatively affects your employees’ productivity at work which costs employers an estimated $250 billion per year in lost productivity and absenteeism.
Increasing Employee Financial Literacy
More than 20 percent of employees told the National Financial Educators Council (NFEC) that they don’t have anyone trusted to turn to for financial guidance.
Employees spend most of their time awake during the day in a work environment of some kind. This puts employers in a powerful place when it comes to educating and providing guidance around financial best practices.
When employees have access to financial counseling and/or coaching, they actually learn how to plan for the future and make smart financial decisions.
Financial counseling can help to:
- Improve your credit score
- Manage your student loans
- Get financially ready to buy a home
- Protect your home
- Establish a budget
- Consolidate your payments with a Debt Management Plan
Providing financial wellness programs, like financial counseling or employer-sponsored small dollar loans, are an effective way to boost employee engagement and productivity while also encouraging employees to take control of their personal finances.
When employees can focus more on their career rather than their financial troubles at home, ultimately your return on investment skyrockets.
Do you offer a financial wellness program for your employees today?
To learn more…
TrueConnect offers employees safe and affordable loans to cover unbudgeted and unexpected expenses through their employer. There is no credit check required to be eligible for a TrueConnect Loan, and it costs nothing for the employer to offer their employees.
For those who wish to further their financial education and would like to learn more about budgeting, retirement, and personal financial management, TrueConnect’s program also offers six free financial counseling sessions.