What is financial literacy and why is it important? It’s knowledge employees need to reduce financial stress and financial wellness programs can help them improve it.

Over 40 percent of employees are too worried about their financial situation today to think about the future, according to a survey by BlackRock.

Despite mounting financial stress, many prioritize convenience over savings. A third of employees would choose to take $1,000 now rather than wait a year for $3,000 and two-fifths of employees would quadruple their transportation costs to save 20 minutes, according to new research by PurePoint Financial.

“Our survey found that 1 in 3 people in the U.S. don’t feel in control of their finances and half are too embarrassed to talk about their savings with their friends,” said Pierre Habis, president of PurePoint Financial.

Habis continued, “We understand how important financial security is to all of us and that saving may seem daunting, but it just takes minor adjustments, such as creating financial goals, setting aside whatever you can manage from each paycheck or searching for better interest rates for your savings account.”

Habis makes it sound easy, but most Americans don’t know where to begin when it comes to improving their financial wellness. What he refers to as minor adjustments could feel like major fundamental changes to a family that lacks financial literacy.

What is Financial Literacy?

Financial literacy is an understanding of the skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources. It encompasses budgeting, saving, investing, and includes anything and everything that deals with money management.

Why is Financial Literacy Important?

Financial literacy is important because it can help people with high levels of debt correct course and better prepare themselves for retirement.

Three years after implementing a financial education mandate for high-schoolers in Georgia, Idaho, and Texas, all three states saw increased credit scores and lower delinquency rates on credit accounts, according to a FINRA Investor Education Foundation-funded study.  

What Are Financial Wellness Programs?

Financial wellness programs are employer-sponsored programs that help employees regain control of their personal finances. It’s become a popular employee benefit in recent years as the effects of financial stress on employee performance have become more clear. The 2018 Employee Financial Wellness Survey by PwC found:

  • 25% of employees report that issues with personal finances have been a distraction at work
  • 43% of employees of those distracted by finances at work spend 3 hours or more at work each week thinking about or dealing with issues related to their personal finances
  • 11% of employees occasionally miss work due to financial stress

Employees were also asked to complete the sentence “My employer financial wellness program has helped me…” and here’s what financial wellness programs helped them accomplish:

  • 41% got their spending under control
  • 39% prepared for retirement
  • 31% paid off debt
  • 27% saved for major goals (home, education)
  • 23% better managed their investments/asset allocation
  • 12% better managed healthcare expenses or saved for future healthcare expenses

Once employees have the financial literacy they need they can reduce financial stress, start reaching their savings goals and spend less time worrying about money at work.