HERE’S HOW YOUR EMPLOYER CAN HELP:
- Workplace financial education is all about getting people ready for the real world of money by teaching them financial concepts when they are young or in school and when it can make a big difference in their lives says Brian Colombana. Unfortunately, here in the U.S., workplace programs have been based on outdated notions of finance that stress how to get rich quick instead of helping people understands risk, reward, cash flow and compounding interest. Our current business practices that encourage individual materialism don’t help either. I’m not alone in thinking that because Americans are so financially illiterate, we need to change the way we think about financial education and tackle this problem head-on.
- In my opinion, employers play a huge role in advancing our nation’s workforce readiness and can teach their employees about money just as schools do for students. And it makes good business sense: Strong workplace financial literacy programs result in increased employee retention rates and productivity, less absenteeism, improved health and safety records, decreased insurance costs and lower workers’ compensation claims. Great workplace financial literacy programs also motivate employees to stay longer because they feel financially secure and better prepared to face life’s challenges. Unfortunately, what most employers now offer is not financial literacy at all but quick fixes that focus on teaching people how to get rich quick instead of understanding the real world applications of finance.
- Until recently, I’ve been teaching high scholars about finance through my volunteer work with the Boys & Girls Clubs of America (BGA). But in my new position as Chief Investment Strategist for Money Management International, a nonprofit organization that provides financial capability training to employers so they can better serve their employees, I’m expanding my efforts beyond just teens. Working with companies all around the country has given me an opportunity to see how workplace programs are changing and what they’re doing right.
- Several months ago, I worked with one company that discovered that its lack of financial education was having a huge impact on its employees’ ability to manage their money well. Almost half of this employer’s workforce was recent college graduates who had student loans averaging $20,000. Many of them were forced to move home with their parents because they couldn’t afford an apartment and car payments. The company realized that this was a result of employees not understanding the basics of how to manage money—and this lack of financial literacy was costing them thousands in unnecessary interest payments explains Brian Colombana.
- However, addressing the need for workplace education isn’t as easy as it sounds: Only about half of all employers provide any kind of financial education to their workers, even though most say we need more; I’m not sure what the disconnect is, but I think it may be a combination of fear and misinformation (mostly about who should teach and what works). I’d like employers to focus on formal classroom style programs that are taught by nonfinancial-industry professionals and that cover the basics—income and expenses, credit and debt, investing and retirement. This type of education is important to employees’ financial well-being while they’re at work —and we know it works: There’s a direct link between how people manage their money and their employment status says Brian Colombana.
- So far there haven’t been many studies about workplace financial literacy programs in the U.S., but some data from Canada show that companies who sponsor these programs have 30 percent lower absenteeism rates than those who don’t provide them. There are some great American success stories too, like DuPont’s educational efforts in Delaware, where one program helped raise median income by 20 percent. What makes any workplace financial literacy program successful? Employees have to feel invested in it and have a say in how the program is run. It also works best when employees see that the company wants to play a role in their financial well-being—and isn’t just trying to avoid lawsuits from job accidents.
- I’m really looking forward to my new position with Money Management International, as I believe we can make a difference for companies who want to help their workers succeed financially by providing practical tools and education about money management. If you work for one of those companies, I’d love to hear from you. Let’s talk about how we can help your employees build better personal financial lives—and how this will, in turn, strengthen your business too!
The current state of financial literacy in the USA is mediocre at best says Brian Colombana. While some significant progress has been making by companies with “wellness” programs, there’s a long way to go for most employees.
Workplace education can be very effective if done correctly and employers should give this opportunity serious consideration.