Why We Advocate: For Employee Financial Literacy

Financial literacy is the ability to understand and use financial skills to manage one’s finances, day-to-day budgeting, and long-term investing goals. When it comes to employees and their essential personal and household decision-making—like managing healthcare options and retirement planning—the premise sounds logical enough. Yet, financial literacy also can generate significant benefits and effects for employers that many business owners may overlook.

Employees who have not received adequate financial education on their benefits are often confused, distracted, and anxious about their personal finances and often forego participating in beneficial programs offered by their employers. The negative emotions around their financials may eventually lead to broader feelings of unpreparedness and lack of control, which can compound during times of economic uncertainty and produce less than desirable results at work.

By contrast, employees who are given the opportunity to understand their financial benefits are frequently less stressed and distracted by money problems while on the clock. For employers, this translates directly into increased employee focus, morale, and productivity. With a proper education around finance, employees ultimately have the tools to make better decisions for themselves and their families long term, including saving money, putting a successful retirement plan in place by participating in plans provided by the employer, and managing their health-care expenses, which can lead into reduced health-care costs for both the employee and the employer. Employees who are confident in their retirement plans and understand their benefit packages often exhibit higher participation and deferral percentages over time.
Finally, employee financial literacy frequently translates into a sense of emotional “financial wellness,” since having one’s day-to-day finances in order means that individuals can confidently save for retirement at an earlier age. The earlier one starts saving for retirement, the longer a person’s money will grow, ergo the better off they will be in the long run. In addition to managing day-to-day expenses, financial wellness also hinges on understanding how to invest for retirement over time and take the appropriate risks to generate the returns that will be needed to live comfortably according to one’s needs.

Ultimately, financial literacy employee programs helps employers build long-term financial security for their employees. This translates into a more productive and engaged workforce that’s focused on excelling at their jobs rather than worrying about financial burdens at home like a sudden medical emergency or an unplanned household expense, both of which could have been planned for.

At First American Bank, we believe in the value of proactively advocating for employee financial literacy with all of our business banking clients. We make ourselves completely accessible to assist business owners in educating their employees about maximizing the benefits available to them, to explaining simple approaches to sophisticated investment strategies for their 401(k) or other retirement plans, and building a company culture that promotes smart personal financial planning among its employees.
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