Ditching Financial Illiteracy
Get this, 71% of Americans think they are financially literate. Is that reality? Far from it. Less and less Americans have a good understanding of how money works. The National Financial Capability Study asked respondents five broad financial questions to measure their financial literacy. The study revealed that only 34% of respondents were considered financially literate, able to answer four or more of the five questions correctly. What are the ramifications of this deficit? More and more Americans are living paycheck to paycheck, not saving for retirement, not planning for emergencies, and racking up credit card debt.
Maybe as an employer you are thinking, “This isn’t my problem. How my employees manage their money is up to them.” True. You aren’t their parent or their teacher. You don’t have to teach your employees financial literacy. It’s not a requirement and definitely not an expectation. However, what if by taking on this battle you could increase productivity, grow your business, and improve the quality of life for your employees? Would you do it?
Here are three reasons to teach financial literacy in your company
1. Your employees’ understanding of finances impacts how they see you and your company
As a business owner or manager, you understand how money flows through the company. Terms like profit and loss, revenue, expenses, income statements, balance sheets, cost of goods sold, cash flow, assets, liabilities, taxes, depreciation, etc. mean something to you. Those numbers impact the goals you set and the decisions you make. When you distribute bonuses, it’s because of those numbers. When you don’t, it’s also because of those numbers.
Many owners fear sharing financial information with employees because it might result in a distrust of the company or employees may demand more from the company based on the information. However, employers need to understand that today’s workforce demands transparency.
Knowledge is power. And while you think that your employees understanding the financial numbers may shift their perspective of the company in a negative way, the reality is that employees’ uneducated assumptions about the financial state of the company is much detrimental than reality.
As your employees grow in financial literacy, they will begin to see the big picture. How do we grow our bottom line? How do we decrease expenses, reduce overhead? With an understanding of finances under their belt, employees will see how their own role and productivity impacts the bottom line. They also will have a better understanding of why you make the decisions you make on behalf of the company.
2. Money is a top stressor for Americans and impacts productivity
6 in 10 adults reported that money was a significant stressor in their life, according to the American Psychological Association. When employees are stressed by their personal finances, it impacts their work performance. This manifests in frequent absentees, work errors, and distractions.
PFSbrands Chief Financial Officer Trevor Monnig describes teaching financial literacy as not only an opportunity to help connect the dots for employees in how the company works, but also to benefit their personal lives: “I love to see them improve in their professional and personal lives. And I’d say helping them gain financial literacy certainly covers both of those realms. And that’s what makes my job really special. But you can only bring it to them. They have to consume it, they have to be willing to go through the door.”
3. It’s not hard to do with the right tools
As a leader and business owner, this likely feels like one more thing to add to your already over-extended to-do list. Fortunately, you don’t need to recreate the wheel; there are plenty of resources already developed to help you provide financial literacy training for your employees.
One unique resource for training your employees on financial literacy is a business simulation board game called Profit and Cash. This fast-paced, interactive environment facilitates team building while teaching how businesses make profit. Players will gain an understanding of not just how a business generates a profit, but how decisions impact the big picture.
Find the training tools that fit your employees and culture, and implement them. You’ll quickly see the two-fold benefit of financial literacy training: the profitability of the company and the financial security and improved well-being of your employees.