3 ways employers can improve employee financial literacy
The UK is “sleepwalking into disaster” when it comes to adult financial capability. So says the government’s own Money and Pensions Service.
The UK has a financial literacy problem – not enough people know how to make a reasonable assessment of their financial situation and plan for their future accordingly.
For employers, the offers an opportunity. Without needing to dedicate too much time or resources, they could help employees dramatically improve their financial literacy and wellbeing. And businesses could see benefits too.
Why poor financial literacy is a bad thing
If our employees don’t know they can get a savings boost through a LISA or tax relief on pensions – free money, essentially – they automatically miss out on something that might be good for them.
And it’s not just about getting the best deals or making the most of savings. Some people might be struggling with bills and don’t know they’re entitled to benefits. Others might be recently divorced or bereaved and having to manage a massive financial issue.
Poor financial literacy = poor financial wellbeing
Where financial literacy is about knowing your options, financial wellbeing is about feeling comfortable with them. Typically, one follows the other: before you can feel comfortable about having enough to live on in later life, you first need to understand how your pension savings actually work.
The problem with poor financial wellbeing is that the sense of unease it creates isn’t confined to personal finances – it can leak into every part of life. According to Cushon’s research:
- Three out of four 4 employees say not having savings is a worry
- Two out of three employees say money worries affect their mental health
- Three out of five employees say money worries affect their performance at work
The cost to UK businesses
Research from the Financial Conduct Authority suggests that, in the UK, 70% of the workforce spend one-fifth of their working hours worrying about money, and that 6.2 workdays a year are lost to absence in employees with high financial stress.
By the FCA’s estimation, the total cost of financial stress is around 4% of payroll every year.
How to help employees improve financial literacy and wellbeing.
The foundation of any financial wellbeing strategy must be learning. Written guides and infographics are a good start, but webinars and personal support are even better.
It’s important to cover all the bases while also leaving room for questions or feedback. The best way to build a financial education programme is to build it with your employees, asking them what’s most relevant and useful.
2. Make support accessible
A good mix of learning materials is essential. Allow for different levels of confidence/knowhow and acknowledge that everyone learns differently. What works for some will not work for others.
Think digital. A good way of making support accessible is to host it online, making it available to anyone who needs it at any time. This rule should stretch beyond education materials – 66% of employees say they would engage more with their pension if they could manage with a mobile app.
3. Celebrate workplace pensions
Pensions used to be a prize that employees stuck around for – golden handcuffs that kept a workforce loyal for life. Now that employees are less likely to stick around until retirement, the link has been severed and companies don’t really get any credit for the money they pay in.
Reposition your workplace pension as the invaluable gift that is. It’s the most important pot of money your employees will ever have. To make people appreciate it (and you) more, start by educating them and move on to engaging them.
We have a duty of care to employees, so improving their financial literacy and financial wellbeing isn’t just a nice-to-have, it’s a must for any employer. We can’t stand by and let the people we work with “sleepwalk into disaster”.
In partnership with Cushon
Cushon is an online savings&investments platform provider, offering holistic workplace savings.