First Midwest BankFirst Midwest Bank logoArrow DownIcon of an arrow pointing downwardsArrow LeftIcon of an arrow pointing to the leftArrow RightIcon of an arrow pointing to the rightArrow UpIcon of an arrow pointing upwardsBank IconIcon of a bank buildingCheck IconIcon of a bank checkCheckmark IconIcon of a checkmarkCredit-Card IconIcon of a credit-cardFunds IconIcon of hands holding a bag of moneyAlert IconIcon of an exclaimation markIdea IconIcon of a bright light bulbKey IconIcon of a keyLock IconIcon of a padlockMail IconIcon of an envelopeMobile Banking IconIcon of a mobile phone with a dollar sign in a speech bubbleMoney in Home IconIcon of a dollar sign inside of a housePhone IconIcon of a phone handsetPlanning IconIcon of a compassReload IconIcon of two arrows pointing head to tail in a circleSearch IconIcon of a magnifying glassFacebook IconIcon of the Facebook logoLinkedIn IconIcon of the LinkedIn LogoXX Symbol, typically used to close a menu
Financial education for employees is good for business
WE HAVE IDEAS.

Get monthly ideas delivered right to your inbox.

Subscribe for Ideas

For Your Small Business Ellen Patterson Ray Martinez November 27, 2024

Financial education for employees is good for business

Whether it’s learning about needs vs. wants in elementary school, or mastering more complex topics like investing, credit, and student loans in high school, early financial education is critical. Today, 26 states mandate financial education as a high school graduation requirement, and that number has more than doubled in the last decade.

However, the majority of significant financial decisions happen after high school, and only 48% of adults are financially literate. Unlike the requirement to pass a road test to earn a driver’s license, there is no test for opening a credit card, investing in stocks, or even buying a house; actions that can have serious financial consequences if not entered into with forethought and understanding.

So, what’s the solution? It might surprise you, but the answer is there needs to be more engagement from the private sector. Companies are uniquely positioned to help produce high quality financial education programs that can be a net positive for their business while helping their employees, customers, and communities.

In fact, the U.S. Treasury Department recently released its inaugural National Strategy for Financial Inclusion, which includes recommendations for how financial institutions and employers can contribute to fostering financial access, resilience, and well-being.

An Overlooked Opportunity

For businesses, helping their employees by providing financial education resources is more than just the right thing to do. It can also support informed financial decision making, leading to healthier, happier, and more productive workers. For financial institutions it can lend itself to greater financial inclusion and create better, more engaged customers.

That’s because deficits in financial knowledge have a real, everyday impact on families. Americans lost an average of $1,506 in 2023 due to financial illiteracy, paying higher credit card interest and fees, overspending more, and falling victim to fraud at a higher rate. That doesn’t even take into account the health impact of financial illiteracy, and its cascading effect on productivity.

Recent research gathered from the American Psychological Association’s "Stress in America" survey has confirmed what many already know and experience: Money and the economy are a top source of stress, and financial stress has increased significantly since 2019.

With the average American having only $400 in cash savings and living paycheck to paycheck, it’s easy to see how financial matters can cause significant stress. And stressed employees are associated with decreased productivity in the form of lower quality work, reduced motivation, and poor decision making. 

Financially educated consumers are better customers as well, with higher financial capability, more disposable income, and higher credit scores. For financial institutions, customers who are more financially savvy not only use more products from their bank or credit union but are more likely to open an account at a bank or credit union to begin with.

But even if they want to learn more about finances, most adults don’t have a definitive resource to turn to for financial advice. Instead, they seek information from friends, family, or rely on the internet or social media. Gen Z, the cohort born between 1997 and 2010, specifically is looking to their employer to fill this void. According to the “Generations in the Workplace” study, 70% of Gen Zers believe it is important or very important that places of employment support employees’ financial well-being through initiatives, programs, policies, and culture.

The good news? With the rise of education technology, it’s easier than ever for financial institutions along with employers of all types to provide high-quality financial education resources optimized for employees, customers, and community. 

Doing Good is Good for Business

Adult financial illiteracy is a problem that saps money, productivity, and even health from American families and US businesses.

By stepping up to fill the void of high-quality adult education, companies have a real and often overlooked opportunity to help their businesses by creating more engaged customers, more productive employees, and more thriving communities. With many different avenues to partner with technology platforms, doing so is easier than ever.

 

This article was written by Ellen Patterson and Ray Martinez from Fortune and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.

Subscribe for Insights

Subscribe