Money talks and people walk – how employers can tackle the financial education deficit by teaching basic principles of money management and receive the benefits of a less stressed, better focused workforce in return.
Coping with the rising cost of living coupled with cross-the-board pay freezes is proving difficult for almost all employees in these fragile, economic times. Especially for those individuals who still have large amounts of debt hanging around their neck; a reminder of the reckless attitude towards borrowing, which was so prevalent during boom-time Britain.
Money management is not taught in state schools and, consequently, generations of school leavers have entered – and are still entering – adult life with little understanding of how to budget, how to save and how to borrow effectively. Unsurprisingly, therefore, mistakes are made and chronic financial mismanagement fast leads to crippling debt levels and increased anxiety.
Employee money worries affect employer profit margins
Money worries inevitably spill over into employees’ working lives, affecting productivity and increasing absence rates. Research conducted by insurance company, AXA, reveals that seven in 10 employees bring money worries into the workplace. While one in five say there’s been an increase in mental health problems such as depression and anxiety, according to the Health and Safety Executive (HSE).
Yet, while almost three-quarters of HR professionals (77%) believe employers have an opportunity to provide financial education in the workplace, only two in five (41%) do so. A further two in five (39%), according to the research carried out by HR Magazine and Vebnet, have no plans to introduce financial education at all.
Research from Moneysupermarket.com has found that 10% of British adults (5m people) are permanently overdrawn. To help tackle this, our website, moneyinmind.com, includes a step-by-step guide on how to put together a household budget, which produces a full, tailored, budget on completion.
Many people get into debt because there’s no reserve of cash to cope with unexpected costs cropping up. This can lead to borrowing more than can comfortably be repaid, which often results in missed payment charges and late fees; adding further to the borrowing burden.
Advice on mortgages, loans and debts helps users to understand how borrowing works. It guides them through choosing the most appropriate financial product for their borrowing needs and helps them learn how to manage debt rather than ignoring it. Getting onto the property ladder is another key consideration and source of anxiety for many. Taking on a mortgage can enable ownership of land and, in many cases, an increase in prosperity when profits are made on the sale of the property. However, failing to keep up with the mortgage repayments usually results in the property being repossessed, a factor that must be fully understood by home buyers. For many, a major obstacle to successful money management is just deciphering all the jargon.
Implementing a strategy to incorporate financial education into the workplace need not be costly and time-consuming. Methods of delivery, such as seminars, can be utilised to target specific groups of employees and are time-efficient, while web-based learning can engage the entire workforce in a cost-effective way. Additionally, web-based delivery is portable, enabling staff members to gain access to essential financial education from multiple locations.
Helping employees plan for life after work
Crucially, employers must provide information and assistance on retirement planning. Final salary pension schemes are closing all across the country, at an exponential rate, shifting the responsibility for providing an adequate pension from the employer to the employee. Organisations must ensure employees understand the ramifications of this.
it is imperative that employees fully comprehend the three basic principles of successful retirement planning; start saving early; ensure enough is saved each month; and understand which factors will affect what happens to that money. These factors include; where it is invested (and how well the investments perform over the term); and how it is converted into an income at retirement, which means shopping around for the best annuity rate or choosing another income option.
Today, many people feel they have no choice but to keep working until they reach state retirement age, and state retirement age looks likely to increase at least to 68 and perhaps to 70 within the next few decades. But, this is only the case if people are relying on the state pension, which could well be a pittance in the next 20 or 30 years anyway. In reality, there’s no reason why people can’t retire earlier… as long as they are saving with the three basic principles of successful retirement planning in mind.
Organisations that manage to implement a robust financial education strategy can benefit from investing a relatively small amount in improving their employees’ financial awareness. They are likely to see workplace productivity improve, which will help strengthen the organisation and increase the likelihood of sustainability and growth. Similarly, these organisations should see a decrease in stress-related sickness absence, which will create additional savings.
Financial education in the workforce, delivered effectively, is likely to improve employee loyalty, as employees feel assured that their welfare is of genuine importance to the employer. Being able to retain key members of staff will improve the organisations chances of being able to stay ahead of competitors. Moreover, upskilling an entire workforce can only be good for business.
Opportunity equals empowerment. Employers that choose to provide the opportunities will empower both the individual employee and the organisation.
Lauren Peters is Head of Financial Education, Money in Mind
Money in Mind is part of Killik Employee Services, a division of Killik & Co LLP