This article was updated on July 3, 2018.
Financial stress on employees can lead to underperformance, health issues and a lack of productivity. That's why personal finance for employees is an important topic for finance leaders to address with the help of their HR departments, in order to have workers perform at their best.
Increase Basic Financial Knowledge
As a CNBC report points out, concerns about personal debt can lead to employees holding on to jobs when they are no longer producing at the rate they once did simply to meet personal financial obligations. Boosting pay probably won't help because these employees haven't learned the basics of savings and budgeting. If they earn more, they simply spend more — and the personal financial challenges continue.
Experian adds that younger workers, particularly millennials, have large gaps in their knowledge about how to handle credit. They lack knowledge regarding the elements of credit and how credit scores are created. They also don't realize how their credit scores affect the rates they'll pay for mortgages, auto loans and other forms of credit.
Though they know how to use financial calculators and other digital tools, millennials rarely have the basic financial knowledge to use those tools effectively. Typically, personal finance for employees is an issue due to lack of financial education in school. LendingTree found only 40.7 percent of college students have taken a personal finance course, and "35% of all Americans graduate the education system without any formal education in personal finance."
This is why it's important for finance leaders to get involved with HR and lend their expertise to efforts to educate employees about their personal finances.
Financial Wellness Programs
Financial wellness programs are gaining popularity among employers. According to Fidelity Investments, 80 percent of employers say their firms would benefit from financial wellness programs that would help employees with basic personal finance like budgeting, emergency savings, health care expenses or planning for retirement. With help from finance to help vet and choose the right program, HR can then effectively incorporate financial wellness initiatives or finance classes into learning systems or other internal educational platforms.
What Finance Leaders and HR Can Do
As a finance leader, you're uniquely qualified to help employees by imparting the knowledge you've acquired in business, finance and formal education as well as what you've learned running an organization's finances. Realize your formal training goes far beyond what the typical employee knows. You can be a key component to help your employees break down financial education to it's simplest elements — just don't get too involved with things like debits, credits or balance sheets.
Instead, start with the very basics of saving, budgeting and the long-term effects of credit card and other debt. You don't even need to develop any materials yourself. The Federal Reserve and other government sites have resources you can refer employees to or have your HR department distribute. But your department's involvement is critical to both lend credibility to the guidance and also show your employees that you understand and are responsive to their needs.
While not all employees will take advantage of this information, this is knowledge most employees need. By providing this type of help, you're showing your employees that your willing to engage them in ways that many employers won't.