Personnel Finance: Productivity Down, Employers Target Debt Stress

Financial education advocates point to three primary places to reach those who need help with their money: in schools, the point of sale, and at work. A debate rages over the first two. But efforts to educate employees at the office are spreading fast.

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Financial education advocates point to three primary places to reach those who need help with their money: in schools, the point of sale, and at work. A debate rages over the first two. But efforts to educate employees at the office are spreading fast.

The issues with school-based programs start with insufficient resources and teacher training. There are also practical concerns about which programs work. There are ideological blocks too: many think school is for Shakespeare and Nietzsche and that teaching kids about money is best left to parents. It isn’t. But let’s move on.

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Education at the point of sale is equally controversial. Would it be helpful? Yes. Consumers are most motivated to learn when confronting an immediate problem. But can we afford to put an independent adviser at the table of every mortgage closing and insurance underwriting? That’s a tall order.

Teaching folks about money in the workplace seems to have the most momentum. Companies can readily tie in money lessons with materials and counseling on benefits like health insurance, flexible spending accounts and pensions. This kind of financial literacy effort was a dominant subject at the most recent meeting of the President’s Advisory Council for Financial Capability, which found that work-based financial education programs have the potential to reach 140 million people.

“This is an absolutely critical issue, and it’s an issue that I think we’re seeing a tipping point on it in terms of what’s happening in the workplace and the way that companies are thinking about this,” former Treasury official Michelle Greene, now vice president of corporate responsibility at NYSE Euronext, told the council. “Workplace financial fitness … makes sense from the business perspective, and it’s the right thing to do.”

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Companies have a big incentive to educate employees about money. In a new Society for Human Resource Management survey, 83% of HR professionals said that personal financial problems have some or a large impact on the work performance of employees. More than half said that employees have dipped into retirement savings in the past 12 months to make ends meet. According to the study, employee money problems resulted in:

  •  47% of HR professionals noticing employees’ struggle with their “ability to focus on work.”
  •  46% noticing issues with “overall employee stress.”
  •  26% observing a negative impact on “overall employee productivity.”
  •  24% saying money woes are leading to “employee absenteeism and tardiness.”

Can financial education at work fix all this? Digging into the specific money issues that employees cite, it seems the answer may be yes, education can fix it. According to the survey, the biggest worry was not having enough money to cover personal expenditures. Other issues cited often were insufficient retirement savings and suffocating credit card debt.

Spending and saving patterns that lead to these kinds of problems are easily addressed through a budget, automatic savings through payroll deductions, and systematic targeting of credit card debt. That doesn’t mean the fixes are easy. Just that they are achievable with the right kind of guidance.

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