Why financial education is important for employees

Financial literacy is the ability to understand and manage your finances confidently, from budgeting and saving, to understanding debt, credit and planning for the future. Put simply, it is about having the knowledge and tools to make informed decisions about money, at every stage of life.

Financial literacy is an essential skill for professionals across all industries and levels of responsibility. When employees have a good grasp of basic finance concepts, the benefits go beyond their personal lives. Understanding how to budget effectively means less financial stress day to day, knowing how to manage debt builds a sense of security, and being aware of workplace benefits means employees can make the most of what is available to them.

44% of UK adults have poor financial literacy, and financial stress does not stay at home. It follows employees into the workplace, quietly affecting their focus, decision-making and output. Employers are uniquely placed to change this.

The real cost of financial stress

Poor financial literacy does not always lead to an obvious crisis. More often, it appears in everyday struggles such as difficulty saving, keeping up with bills, or managing growing debt. For some, it means living paycheck to paycheck. For others, it means avoiding their finances altogether.

When money becomes a source of stress, the impact rarely stays at home. A study found that 39% of employees feel their financial struggles prevent them from performing at their best. Whether that means taking time off or simply being too distracted to give their best, the effect on productivity, morale and business performance is very real.

Financial literacy as a key life skill

Financial literacy was only added to the national curriculum in 2014, meaning a large proportion of today’s workforce has had little to no formal financial education. For many, what they know about managing money has been learned the hard way.

The workplace is increasingly recognised as one of the most effective places to change this. Sharing resources, running short sessions on pensions and savings, or simply opening up the conversation around money can all have a meaningful impact. For employers with an Employee Assistance Programme in place, it is worth ensuring employees know that financial guidance is available through it. Signposting this support clearly and regularly can make a significant difference to those who may not know where to turn.

Poor financial literacy can also prevent employees from fully engaging with workplace benefits such as pensions and salary sacrifice schemes. In fact,41% of UK employees do not understand their workplace pension meaning that without clear communication and education, even a generous package can go unused.

What can employers do to support financial education?

Supporting your employees’ financial wellbeing is one of the most practical steps an employer can take. Employees under financial stress are more likely to take sick days, struggle to concentrate and start looking elsewhere for work. Addressing that, through education, resources and clear communication, reduces absenteeism, improves day-to-day productivity and makes you a more attractive employer to work for and stay with.

Tailor your approach

There is no one size fits all solution when it comes to financial education. The needs of your employees will vary depending on their age and life stage. Employees starting out in their career may need support with budgeting and understanding their payslip. Those in the middle of their career might benefit from guidance on savings and growing their pension. Staff approaching retirement will likely want to focus on retirement planning and making the most of what they have built up. Taking the time to understand where your employees are in their financial journey means the support you offer will actually land.

Create a culture where money can be talked about

Financial stress is still one of the biggest workplace taboos. Opening up the conversation and training managers to spot the signs of financial stress means employees are more likely to seek help before things reach a crisis point.

If you want to learn more about how to support your employees’ financial wellbeing, reach out to us today. We are here to help you build a benefits package that makes a real difference