Financial illiteracy is hurting worker savings — but employers can step in
- Nearly one-fifth of Americans (18%) spent more money than they had on hand in 2015, according to FINRA Investor Education Foundation, a non-profit organization. This figure didn't include the purchase of big-ticket items, such as a home or car. An even greater segment of Americans (21%) said they had overdue medical bills in 2015.
- The study says that much of being financially capable is having sufficient savings. People who aren't balancing their expenses with their monthly income are likely struggling financially. Medical debt further complicates people's ability to meet their financial responsibilities.
- The study also shows that in 2015, 40% of people had a rainy day fund compared with 50% who didn't have one; 32% of people paid only the minimum balance on their credit cards, while 52% paid their balances in full; and only 63% of people answered three or fewer financial questions correctly, compared with 37% who answered four or more correctly.
Employees' struggle with their finances is increasingly an employer's problem. A recent survey reports that 78% of U.S. workers said they were just getting by between paychecks, while another Humana study cites financial problems as a top stressor for workers. And one in three workers said their financial woes are a distraction at work, according to a study by the Center for Financial Services Innovation.
Clearly, employers have an opportunity to improve employee productivity and improve retention in one fell swoop. More employees are including a financial well-being component, along with emotional healing, in their wellness programs. A study by Fidelity Investments and the National Business Group on Health (NBGH) found that 84% of companies polled now include financial security among their benefits offerings.
Providing workers with information or training sessions on balancing expenses with earnings, budgeting, avoiding debt (where possible), saving for retirement and making sound financial decisions can help minimize their stress and raise productivity. Substantial returns are possible for employers who are willing and able to make the investment.
- FINRA Investor Education Foundation National Financial Capability Study
- HR Dive Survey: 84% of companies now offer financial well-being benefits