2020 has had a massive negative impact on our finances, both as a nation and for many individuals, which has led to high levels of anxiety among workers. A factor in reducing financial anxiety is increased levels of financial education, something that is severely lacking among the population at large. A lack of financial education has wide-reaching effects, leading to potentially dire consequences for society and businesses. Employers can play a part in remedying the situation, offering financial education in the workplace, something that many don’t even receive at school.
Why is financial education for employees important? If an individual feels ill-prepared to make financial decisions, when the time comes, they are more likely to make bad ones. Not understanding the importance of savings, the dangers of debt, and the risks of credit, can place an individual in dire financial need and a society made up of people like this can make an existing economic disaster even worse.
Speaking about the current economic environment, Catherine McGuinness, policy chief at the City of London Corporation, has told the Financial Times: “If we’re to have a sustainable recovery it is vital that people . . . understand how their financial decisions will affect them over the short, medium and long term.”
While we can’t prevent situations like pandemics impacting the economy in the first place, a society of reckless spenders and borrowers with no savings makes economic recovery incredibly difficult and exasperates recessions. However, when financial education is higher in a population, people borrow less and therefore recovery happens more quickly. Thusly, it’s quite easy to see the importance of an educated populace when it comes to personal finances.
So, financial education is good for society but how about businesses? Well, first of all, we can recognise that a reduced risk of a broader financial crisis is good for individual businesses. Very few companies come out of difficult economic situations unscathed so by helping individuals to behave responsibly with their money, you can help society recover more quickly and therefore limit the damage caused by prolonged exposure to a crisis.
Further still, improved financial literacy among employees can help to reduce financial anxiety due to better decision making. When employees are less anxious and worried about personal money problems, they will be happier as a result and therefore more productive in the workplace. It’s far better for a business to have an office full of workers feeling good, concentrating on work rather than fretting about their economic situation due to debt and poor financial decision making.
A happy worker is a productive worker so if a business can help in their financial education, not only are they doing the individual and society a service, but the business can also ultimately benefit as well.
There are numerous ways that businesses can go about helping to financially educate their employees, whether that be through team meetings, company talks from high-level staff, or providing access to financial resources. Even something as simple as helping staff understand their pay-check (taxation and all) can be beneficial.
Company pensions can be another great opportunity to teach about finances, using this as a chance to highlight the importance of augmenting state pensions and why saving for the future – even while young – matters. Further still, assessing how much income is needed in retirement requires budgeting skills, providing a further teaching opportunity stemming from employer pension guidance.
If you look after your employees, they will look after you. So, taking the time to help improve their financial literacy and using natural opportunities presented in work life to give them a basic financial education, is good for business.
As you look to help your employees, we’re here to help you. Our HR technology consulting services can put your HR team in the best position possible to tackle whatever the future might hold. If you think Phase 3 can be of assistance to your business, perhaps with our payroll services, please get in touch.
This blog has been written by James Proctor, Director of Consulting & Services at Phase 3.