Financial literacy and your bottom line

Financial literacy seems to be a term on everyone’s lips lately. In 2009, the federal government formed the Task Force on Financial Literacy, and last year, Finance Minister Jim Flaherty declared November Financial Literacy Month.

Several factors support the argument that employers should also be helping to improve their employees’ financial education. First, research suggests that those who lack solid financial skills have higher levels of stress. The Financial Education in the Workplace Survey, conducted in December 2011 by A Better Quality of Life Financial Consulting, found that of 608 working Canadians between the ages of 21 and 60 polled, one in four is seriously distressed financially. Additionally, employee assistance program provider Shepell•fgi says 63% of all finance-related calls to its service in 2010 were for assistance with personal debt and credit issues—up from 50% of finance-related calls in 2009.

Second, many Canadians lack an understanding of mainstream financial products such as RRSPs and tax-free savings accounts, let alone their company DB or DC plan. And the government’s new pooled registered pension plan will likely add to the confusion. Without proper knowledge, there is little hope of these programs helping Canadians to save for the future.

Third, evidence suggests that employees do want financial education available to them in the workplace. According to the Financial Education in the Workplace Survey, 86.7% of respondents want their employer to offer a financial education program. If one was offered, nearly nine out of 10 employees indicated that they would participate.

The business case
While employees may be looking for financial education, employers will want to understand the business case for providing it. In a 2009 survey by Desjardins Financial Security, 61% of respondents cited money as one of their stressors. Stress has repeatedly been linked to poor health. The consequences to employers are increased health benefits costs, absenteeism and declines in productivity. Further, a 2009 study from the Personal Finance Employee Education Foundation in the U.S. demonstrated that the return on investment—through lowered healthcare costs and increased productivity—for employers that offer a comprehensive financial education program is as much as three to one.

Of course, the expression “a little bit of knowledge is a dangerous thing” can be applied to personal finances. Occasional lunch and learns and once-a-year financial seminars can create more questions than they answer. Effective financial education programs are comprehensive, systematic, easy to use, multi-platform and interactive. They must also be designed with all employees in mind. The financial concerns of a 23-year-old are very different from those of a 50-year-old.

A financial education program offered on at least a monthly basis can help to increase employee engagement. Lessons should clearly explain financial concepts in simple language using graphics and fill-in-the-blank learning tools. Employers can augment this education with access to Certified Financial Planners for follow-up consultations.

Of course, even with all of these pieces in place, employees may see financial education programs as just another task and may reject the additional “work.” Companies should create a culture of financial success through support and encouragement from senior executives and HR, and by providing participating employees with financial or other incentives. (Each company will know how best
to incentivize its staff.)

The demand exists for financial education programs in the workplace. When delivered properly, they can generate a tremendous return to a company’s bottom line through decreases in employee stress and the associated health concerns, increased productivity and greater commitment to the organization.

Frank Wiginton is CEO of the Employee Financial Education Division of A Better Quality of Life Financial Consulting. frank@employeefinancialeducation.ca

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