How to Support Employee Financial Literacy — And Why You Should

Financial stress is often in the background for employees in one way or another: having low — or no — savings, not saving enough for retirement, struggling to pay out-of-pocket medical costs, dealing with child care or caregiving costs, and more.

But the pandemic and high inflation have undoubtedly exacerbated that stress, said Ted Kane, wealth and financial security practice leader at insurance brokerage firm Brown & Brown in Southborough, Mass. “People know it, they feel it,” he said. “The people in HR know it, too. And they personally feel it.”

Complicating the matter is that a significant number of employees don’t know a lot of the basics about personal finance. That can be a big problem for both employees and employers — in the form of presenteeism, dissatisfaction, decreased engagement, and mental health conditions. 

SHRM data found that 83% of HR professionals say employees’ personal financial challenges have a negative impact on work performance (either “large” or “some” impact). And HR leaders consistently report that few employees are truly savvy with money — only 13% of HR pros rated their employees as “very financially literate.” Meanwhile, roughly 19% of working Americans reported depression tied to financial problems, especially during the pandemic (rising to 52% among unemployed individuals), SHRM data found.

Although the challenges are plenty, they also present an opportunity for employers to step up, Kane said.

“A lot of employers are recognizing that there’s a link between physical and mental health and financial well-being. And they are figuring out what programs they can put in place to reduce the stress,” he said, adding that employees of all income levels deal with financial stress, insecurity, and low literacy. 

SHRM spoke with Kane about the state of employee financial literacy, how basic education can help turn the tide, and the importance of benefits communication.

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SHRM: Tell me about the state of financial literacy.

Kane: I’m very frustrated that financial literacy is [rarely] discussed. Most people come into the workforce with a very basic understanding about general finance. You’re forced to learn as you come into adulthood, so you hope that there are resources and mentors around that will help you answer the questions when you have them, as a first step, and then provide some underlying education as you go along. 

Employers aren’t responsible for this, but they are responsible for the well-being of their employees — if they want healthy and productive employees. So they need to tackle it, and they need to make sure when they do that, they recognize that different generations and different demographics and different cultures are going to have different understandings and needs for financial well-being support. They need to personalize, to make sure that they’re meeting those employees with materials, education, support, counseling, coaching — things that are going to really have an effect.

SHRM: What can employers do to help improve financial literacy, particularly with younger generations new to the workforce? 

Kane: It should be a part of onboarding, walking people through basic resources available. I think employees who are just starting out are really hungry — they want to figure out what this real world is all about. We do a financial onboarding here in our office. We’re part of a larger Brown & Brown organization, but we have about 110 teammates who are part of our group, so when we have our college class [or first-time employees] come in, I’m one of the speakers. We basically lead a little classroom, like, “Here are your benefits. What do you need? What should you be thinking of? Here’s your retirement and your stock options. Should you participate in this? Should you be in a 401(k) or a Roth 401(k)?”  

These are young, intelligent people. Once you give them the information and they ask questions, then they take action. Young workers may not be making huge amounts of money, but if they can recognize the power of compound saving, for example, it’s well worth the employer’s time and effort to help them with that. You can help your future stars by giving them that information at the very get-go.

SHRM: Aside from that education component, what does the landscape look like right now in terms of financial wellness offerings and benefits? What are some of the top trends you’re seeing?

Kane: Student loan repayment programs are a big one. I think there’s [less than] 20% adoption now, but large employers are very seriously looking at it, and SECURE 2.0 is giving them more incentive to look at it. We see a lot of discussion about student loans and loan repayments and how that can be accomplished. We’ve also seen a lot more discussion about coaching. There was a survey last year that said, of the benefits that employees don’t have but they want, financial coaching would be the one they want. And very few companies actually have that in place. Or if they do, [employees are] not aware of it, or the vendor hasn’t made it readily available.

SHRM: Now we have many organizations pulling back on pay raises for employees. Any advice for employers looking to improve employees’ financial well-being without relying on higher wages? 

Kane: A flat wage just when everything else goes up — you’re going backwards. That’s going to exacerbate and bring attention to [employees’ financial stress]. Employers, rather than throw more money into new programs, they want to get the most out of what they have now. There’s a lot that employers are already spending on these things that they may not be aware of because they are value-adds to existing partners with carriers and providers. Even if they are aware, they may not be maximizing the value of those benefits by communicating in a more strategic way, a more personalized way, to get people through their own financial journeys in life, realizing, “I have this benefit through work, all I have to do is call, and somebody will help me in the right direction.” So we’re really trying to help employers understand what they have with all their existing relationships and work with their existing vendors to optimize that.

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SHRM: Setting it and forgetting it is certainly not the best benefits strategy, yet we see organizations do this all the time.

Kane: If you don’t communicate about it, it won’t get any engagement. There are companies that spend a lot of money putting things in that look great. But if you have 4% or 5% participation, you really wonder why you have it in place.

SHRM: What’s the one thing employers aren’t doing enough of that they should do more of when it comes to financial well-being?

Kane: It comes back to communicating with employees and optimizing the relationships [employers] have in place. It’s about making sure that their brokers and consultants are doing their due diligence, talking to all their vendors, uncovering what is financial well-being in terms of their product and service delivery. There is a lot of fragmentation. Organizations need to put that all together and optimize that for employees, in terms of the benefits they have available, and then figuring out the best way to communicate them.  

How do we raise awareness? How do we communicate about this on an ongoing basis, so employees are aware of the support we offer? With financial well-being, this isn’t something we want to tie simply to annual enrollment. This needs to be communicated throughout the year.