Let’s break down “financial literacy”.
This hot term has made a big appearance all across the country as of late.
The goal behind teaching financial literacy is to help people, your employees especially, develop a stronger understanding of basic financial concepts so they can make smarter financial decisions.
Since the onset of the pandemic, 91% of employees say they have faced a personal financial issue, whether struggling to maintain a household budget, reduce debt or build emergency short-term savings. That’s not just more than half; that’s almost every single one of your employees who could be struggling financially and you would never know.
Most people don’t want to share their dirty laundry when it comes to finances. They want to keep this private.
While there’s nothing wrong with wanting to keep this to themselves, it doesn’t mean they don’t need solutions or doesn’t mean they don’t want their employer to offer more financial wellness programs…
Are “financial literacy” programs truly worth it?
United States employees struggle especially when it comes to their finances. It’s a known fact these days and provides men and women across the nation with added stress that permeates into both their work and personal life.
Specifically,
- Around 58% of Americans live paycheck to paycheck in 2022
- Approximately 157 million U.S. adults make up the 58% who live paycheck to paycheck
- 30% of people living paycheck to paycheck make $250,000 or more
- In 2022, approximately 56% of Americans would be unable to cover emergency expenses of $1,000 or more
Because of these numbers, to some employees, financial security can feel nearly impossible.
Yet, when you have this skill set and feel financially literate, you’re able to understand the major financial issues most people face:
- Budgeting
- Emergency savings
- Debt management
- Investing
4 topics to learn about to be “financially literate”
Educating employees about numbers, best practices, tips and tricks is all great as well, but the real key here is teaching them how to actually put these to use.
It’s all about taking action.
Budgeting
Anyone can create a spreadsheet and can crunch numbers, but it’s a whole new ballpark when you learn how to put these into action. Being able to answer these questions and actually create a plan:
- How much money am I making this month?
- What are my expenses?
- How much can I allot to savings?
- Is there anywhere that I may go over this month that I should prep for?
- Is there anywhere I should be careful of going over this month?
Being financially literate can make people smarter with their money so that they feel more secure with their paychecks, even if they continue to live paycheck-to-paycheck…for now.
Emergency savings
Similar to budgeting, most Americans don’t have an emergency savings fund, as mentioned earlier. This can feel super challenging to save for when you’re living paycheck-to-paycheck. Why put money into savings when you have barely enough money to cover rent, food, daycare, gas, etc.?
But, when you’re financially literate, you’ve learned how important this is to have in your back pocket. It’s taking your budgeting one step further and actually taking action on your immediate future.
The goal is that you’re saving towards having three to six months worth of expense coverage in your emergency savings fund.
Debt management
Debt comes in all shapes and sizes. Debt could look like
- Mortgage
- Auto loans
- Credit card debt
- Student loans
- Personal loans from family and friends
While this stat is a few years old, it’s pretty safe to assume that this hasn’t changed a lot especially with the effects of the pandemic on the economy… 40% of Americans spend up to half of their monthly income in debt payments.
This can be a confusing topic to cover because there can be very confusing teachings when it comes to debt and paying down debt. Should I only use up to 30% of my credit card limit? Am I supposed to pay down all of my debt every month? Should I keep some debt on my credit card? How does this impact my credit score?
Providing financial literacy education and tools to teach best practices here and that allows employees to stay out of debt can be monumental to their abilities to stay out of the weeds. This then also impacts their ability to budget smarter and fund their emergency savings…
Investing
The end goal right? It’s a major challenge to be able to invest when you struggle with the three items above: budgeting, emergency savings and debt management.
Those who are financially literate have most likely been able to tackle the above three in some capacity, or they’re on their way to doing so. Investing takes time and resources to learn and is usually the last on the totem pole, but it is another area of financial literacy that should be talked about more…
The way of the future
Offering benefits in the workplace that enhance one’s financial education AND that provide financial wellness tools to help speed this process along is the way of the future.
Financial wellness tools that have safety measures in place and that provide benefits like:
- Automated payroll deduction
- Free financial counseling
- Opportunities to build credit
- Programs for people anywhere across the financial spectrum (no credit, poor credit, great credit)
Are you offering your employees programs that will lead them to financial literacy?
To learn more about TrueConnect’s Financial Wellness Platform, with access to financial advisors, emergency savings plans and loan options for your employees, click here.
