Most of the employers I know really care about their employees. When a good employee—though they’re getting paid fairly—still has too much month at the end of the money, the employer often is happy to “help out” with an advance on their paycheck. As nice as this sounds, it’s usually a bad idea. Unless there’s some unforeseen emergency, this kind of transaction sets everyone up for failure in the future. A much kinder option is to help all employees with training in financial literacy.
As recent studies have shown, many Americans don’t know that much about how to manage their finances. The National Financial Educators Council has a basic financial literacy test that covers things like setting up an emergency fund, and why it’s important to have a good credit rating. It doesn’t even touch complicated financial instruments. The test was set up primarily for college students, but only half the people who took it—people of all ages—passed.
As a business owner or manager who has to know a lot about finances, you may assume that your employees know how to make sound financial decisions like setting up a budget and sticking to it, dealing with credit card debit and the importance of saving for the future. But often they don’t. Instead of giving them a fish—that paycheck advance—you, your company and the employees would be better off teaching them to fish by inviting a professional to give financial literacy classes.
Here are some of the benefits you can realize by providing employees with a financial education:
It will be seen as a part of the benefit of working for your company: One of the first tasks in creating a financial plan is to think about what kind of life you want in the future, and then begin to learn to manage the steps to get there. Helping employees realize their own personal life goals and dreams is a sign that you have a supportive culture.
It could make them better employees: Because people who manage their finances successfully are more likely to be reliable employees. Giving employees the skills to plan long term, to think strategically about their personal goals, and practice delayed gratification in pursuit of those goals, is likely to raise the responsibility level of employees. It also will probably make them more conscious about the company’s expenditures.
They are likely to be happier employees: Stress is one of the biggest reasons for workplace difficulties. When people can pay their bills, their stress levels drop considerably. They’re much more likely to be happy, therefore forge better relationships with co-workers and customers.
They’re less likely to dip into their 401Ks: The penalties for dipping into your 401K early are huge. The better able people are to manage the money they have now, and plan for the future, the less likely they are to burn up those 401Ks and incur the penalties and taxes.
Employers aren’t supposed to be surrogate parents or “The Bank of….” However, an employer does have the opportunity to impact employees in great ways—helping them develop skills, build a sense of self-worth, and provide for their livelihood in return for their contributions to the company. That’s what the best organizations do, and what their cultures are about. If you want to know how to do a better job of this with your teams, contact us!