Preparing Your Employees for a Financially Secure Future

It is widely understood that financially stressed employees are less engaged at work. In a country that is currently plagued by rising petrol, food and electricity costs – amid the stress of loadshedding and regular increases in the repo rate – it is no wonder that financial constraints negatively impact South African employees’ productivity. A financially stressed employee will spend, on average, 20 hours a month dealing with financial issues at work. This equates to employees spending approximately 27 working days in a year, more than two a month, dealing with financial issues as opposed to focusing on their work.

To effectively navigate the relentless stress caused by money matters, financial literacy has become an essential life skill. It is a long-term solution to the stress caused by financial problems. When individuals are financially literate, they are better equipped to navigate the complexities of the financial world and avoid common pitfalls.

What is financial literacy?

Financial literacy is financial understanding and the ability to use financial skills, such as budgeting and money management, including paying bills and other expenses. It also encompasses financial matters that relate to borrowing and investing, such as taking out short-term loans, applying for and paying off a bond, saving money and retirement planning.

The severe disadvantages of financial illiteracy

A lack of financial literacy is costly. People who are not financially literate generally have a more challenging time understanding how to balance their budget, save money and plan for retirement. They are more vulnerable to reckless spending and predatory lending, which can lead to being in debt beyond their means to repay their loans. It can lead to divorce and broken homes, foreclosures, lack of economic development, homelessness and even suicide in extreme cases. And it can lead to health issues that include stress, anxiety and depression. In South Africa, according to DebtSafe Financial Reality Survey¹ published in June 2019, debt-related stress is one of the key factors that contributes to mental health issues that impact employees in the workplace.

Benefits of educating employees in financial literacy

Improving your employees’ financial literacy can help your organisation in several ways. Learning how to manage finances and cultivate better saving habits can help counter money stress. Reducing stress levels leads to improved employee focus and productivity. The numerous benefits of improving employee financial literacy also include:

• Improved overall health and wellbeing
• Less absenteeism
• Lower health costs
• Greater employee retention
• Better understanding of their role in business growth
• A greater chance for employee career advancement within the organisation

In these ways educating employees to be financially literate is good for a company’s bottom line.

The effects of financial illiteracy are self-perpetuating

Financial illiteracy is perpetuated in families as a lack of adequate financial education will see most young people following the same financial patterns as their parents with no or little chance of breaking the cycle. On the other hand, preparing family members through financial education helps to ensure they have the knowledge and skills necessary to be effective in managing and growing the family’s wealth. In modelling sound financial behaviour and passing on financial know-how, they are leaving a legacy for the next generation.

How to support your support employees’ journey to financial literacy and stability

Employers are perfectly placed to impact and change the course of employees and, by extension, their families’ lives.  By investing in your employees’ financial understanding, you can contribute to their overall wellbeing, engagement and productivity in the workplace.  In keeping with the whole-person nature of today’s employee health and wellness programmes, it is important to consider a comprehensive approach to educating employees in the facets of financial literacy by incorporating a variety of strategies.

Here are eight ideas that you can implement to support your workers:

• Quantify current financial literacy skills: Assessing your employees’ current financial literacy skills is an essential first step in developing an effective financial education programme. This will allow you to gather information on your employee’s current level of knowledge, their financial habits, and the areas where they may need additional financial education or support.
• Encourage budgeting and financial planning: Tap into professional resources to provide workshops on budgeting techniques, saving strategies and financial goal setting to help employees gain control over their day-to-day finances.
• Offer financial education and literacy programs: Collaborate with financial experts or partner with professional financial organisations to provide no obligation educational sessions on topics such as debt management, investment planning, and understanding financial products.
• Provide access to financial tools and resources: Offer employees access to financial management apps, online calculators, and resources that can assist them in tracking expenses, setting savings goals, and making informed financial decisions.
• Implement workplace savings programmes: Provide incentivized or employer-matched savings programmes that encourage employees to save for the future, to get them into the habit of saving and provide them with a sense of financial security for the future.
• Offer affordable loan options: Explore partnerships with responsible financial institutions to provide low-interest loans or emergency funds for employees facing unexpected financial challenges.
• Promote financial literacy training through employee wellness programmes: In recognition of the link between financial stress and overall wellbeing, consider offering employee wellness programmes that include financial health education alongside stress management workshops and financial counselling through employee assistance programmes.
• Foster a supportive workplace culture: For many people, talking about financial matters is taboo. Strive to create a safe environment where employees feel more comfortable discussing financial matters – at least in principle. Encourage open communication and provide avenues for employees to seek confidential guidance on financial matters.
• Track employee financial literacy progress
  Keeping track of employee participation and progress will help you evaluate the effectiveness of the programme, allow for necessary changes and additions to be made, and determine whether it is meeting your intended organisational goals.

• Provide ongoing support: Financial education is not a single event – it is an ongoing process as skills are learned and habits formed. It is important to provide employees with ongoing support to ensure that they continue to build their financial literacy skills. One way to do this is by offering additional resources, such as financial coaching, incentives and financial tools.

Ensuring that employees are financially literate and providing ongoing financial education is a win-win for companies and their people. The company benefits through improved productivity, lower absenteeism, greater retention and retaining employees who are better able to upskill themselves. And beyond understanding how to manage daily money matters, financially literate employees are empowered to make informed decisions that significantly impact financial wellbeing for themselves and their families today and into the future.

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