Financial education for employees? The business benefits of good citizenship

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Thanks for sharing such an interesting article! The changing scenario of financial technology in 2016 will certainly be a boon for millennials who are self-educated and independent decision makers ...


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Should businesses be providing general financial education to their staff?

Research undertaken by Secondsight (1) found that 67% of the working population receive no financial education from their employers. Only 20% of employees had a coherent financial plan and a third claimed to have only a vague idea about money management. Half of employers surveyed said that their staff had asked for help with financial education.

Clearly there is a financial education gap that needs filling – but why should this be the responsibility of employers and their HR functions?

With the roll-out of auto-enrolment workplace pensions by 2018 all employers will have responsibility to offer access to pension schemes. With this should come guidance on the schemes offered and on the need for employees to augment their state pensions – particularly with the state pension age moving higher. Supplementing pension provision with workplace savings schemes is a logical further development employers should consider. Additionally the process of providing guidance on pensions and savings feeds through to other aspects of financial education. Assessing how much income is needed in retirement requires budgeting skills and an understanding of taxation. In effect pension guidance is a stepping stone to wider financial education.

Providing help is clearly good citizenship but it is good business sense too. Money worries are anecdotally one of the most common causes of keeping people awake at night. Certainly financial competence reduces the risk of getting into money problems and is therefore conducive to greater productivity by reducing stress levels. Research by the University of Warwick shows that happy employees are 12% more productive than the ‘average’ employee (2).

There are other potential benefits. Providing financial education is perceived as an employee benefit and can help with employee retention. Additionally, assisting with pension planning will help the transition to retirement of older employees. This would help with succession planning by providing further options for younger employees that might otherwise not be available given that the compulsory retirement age has been abolished.

Although most employers do not have the resources and skills to provide financial education there are freely available services to help provide support. The Money Advice Service and Age UK provide simple and easy to use on-line financial tools.

Additionally the Open University Business School’s True Potential Centre for the Public Understanding of Finance (True Potential PUFin) provides a suite of short courses on personal financial management that are free for everyone. These can readily be used to support employer-based financial education programmes.

Such approaches don't just help develop employees’ confidence in financial matters, they are good for business - and for that reason, HR should get involved.

Martin Upton, director, True Potential Centre for the Public Understanding of Finance, The Open University Business School

References

(1) Secondsight/Foster Denovo (2014) ‘Secondsight research highlights more than half of UK companies do not provide financial education to their staff’, [online] http://www.businesswire.com/news/home/20141007005466/en/Secondsight-Research-Highlights-UK-Companies-Provide-Financial#.VgUrh0uFODY

(Accessed 14th October 2014)

(2) Oswald, A. J., Proto, E. and Sgroi, D (2014) ‘Happiness and productivity’

Journal of Labor Economics (JOLE), 3rd Version, February 2014

Comments

Here at Money Fight Club we are increasingly been called upon to deliver financial wellbeing workshops as part of broader employee wellbeing programmes. Given the increasing emphasis on managing workplace stress and the role that financial stress can play in this, employers ignore this area at their peril. Financial education is very different to financial access. Simply having a pension or giving staff access to an IFA does not change people attitudes to, or worries about money. People need to be engaged at a transformational and motivational level, with humour and a lightness of touch. In many respects, money worries are the last great taboo and it can be extremely difficult for someone who is, to all intents and purposes well paid, to admit they have money worries or are not managing domestic debt.


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Thanks for sharing such an interesting article! The changing scenario of financial technology in 2016 will certainly be a boon for millennials who are self-educated and independent decision makers about their finances. Financial technology will not only enhance their overall user experience, but also make their lives easy in terms of daily banking transactions and investments. – Via www.synechron.com


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If employees get the financial education then they will be able to save their income according to changing the market and they will also become able to understanding the financial or economic situation of their company. It can create understanding between company's needs with an employee.


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