The economy might be improving, but employees’ knowledge of how to manage their paychecks is still in dire need of help.
In the National Foundation for Credit Counseling’s 2015 Consumer Financial Literacy Survey, 40 percent of U.S. adults said they have a budget and keep close track of their spending. When asked about their knowledge of personal finance, about 59 percent gave themselves an A or B grade.
Meanwhile, 75 percent agreed and 23 percent strongly agreed they could benefit from professional advice and answers to everyday financial questions. One of the best places they can get these answers is from the place they spend most of their waking hours — the office.
Jim Chilton, founder and CEO of the Society for Financial Awareness, works with companies to help employees get back on track. He talked with Chief Learning Officer about the programs he offers. Edited excerpts follow.
How can employees’ financial illiteracy affect employers?
People come to work every day with money issues. If your employees are preoccupied with debt, they just had another squabble with their spouse, or their kids come home and need something new, how well do you think those parents are thinking about their job? They’re not. So the employer has to worry about poor performance, lack of focus and shoddy work.
What can learning leaders do to help employees get a better understanding of money management?
They need to address it like anything else and create something that evolves into a solution. They need to realize that they need to pick up the slack. Create lunch and learns were employees aren’t forced to go but invited. Bring in financial experts, and make it a group thing to add support.
If an event is volunteer-based, how can you make sure that it reaches the people who need it the most? How can a learning leader identify and target those lacking in financial know-how?
It’s as easy as looking at someone in a bread line and wondering if they’re hungry. Employees hurting the most inside have self-incrimination for the mess they’re in with their money. Who do you think are the first ones to sign up? They are, and they go back to their pocket of colleagues they work with and on the QT share their problems, how they solved their problem, and then those people start calling.
If the employer or decision maker doesn’t create the right environment, you have the agony of workers who screwed up financially. If you open it up, they come in camouflaged without a target on their backs and can feel good about themselves even though they’re thirsting for knowledge.
What are the biggest barriers between employees and financial literacy?
Challenges are social and behavioral. Think about when the economy is slipping: Back in 2008, the government defined the Great Recession as “people aren’t spending money.” We should be bragging that we lead in savings and investing, not in spending.
It’s behavioral because most people don’t learn the basics and develop a ready-fire-aim mentality. A want becomes a need, and a need becomes a purchase.
If American financial illiteracy is a behavioral issue, does that mean that its roots go back to before employees get their first paycheck?
One of the first planning moments for most teenagers is when they’re buying their first car and have the obligation of monthly payments. Today, they get none of that because their parents get them credit cards. Until the schools throughout the states have mandatory edicts to put financial literacy into the core curriculum, expect generation after generation to continue this way.
Learning leaders have to take responsibility because the schools are failing. If we’re ever going to get it, we have to make dramatic changes.