Employers can upgrade financial literacy

Does your new employee have a savings account? Does he or she know how to budget a paycheck?

These are important questions since the whole reason companies offer a salary and benefits is to make employees feel compensated and valued. If employees don’t know how to manage money or don’t understand the benefits on offer, they’ll be unhappy at work.

Companies that spend a little more time making sure new workers are financially literate can make a huge difference in their employees’ lives, according to a new study by the Center for Public Policy Priorities and RAISE Texas. And employees who manage their money

are happier and more productive.

About half of all Texans do not have savings accounts, and 60 percent have subprime credit scores, according to the two nonpartisan antipoverty organizations. Thirty-two percent of Americans between ages 53 and 62 have no savings at all, according to BankRate.com.

Those kinds of financial problems take a toll.

“Financial stress can lead to reduced productivity, distractions in the workplace, absenteeism and, according to some reports, higher employer health care costs,” the study says.

Improving those statistics should be the goal of every business, and a little extra training on financial literacy during the onboarding process can make a huge difference for the worker and the company.

“Employer-based financial wellness programs can be implemented into the workplace at low or minimal cost,” researchers found. “They are a unique benefit that help attract and retain employees, reduce employees’ financial stress and support employees’ financial stability.”

The study’s authors recommend:

• Make sure new employees understand all their potential benefits, including retirement plans. Employers should automatically enroll workers in retirement plans and only allow them to opt out after explaining what they are giving up.

• Explain that new employees should split their paychecks between checking and savings accounts. Employees are more likely to build up financial cushions if the money is not readily accessible.

• Bring in an outside financial coach, such as nonprofit counselors from Goodwill, to offer individual advice to each new employee. This may be the first time a worker has had access to professional advice on managing money.

• Let the employee know about the dozens of free resources available to learn more from, including government agencies like the Federal Reserve and nonprofit groups like the United Way.

• Offer annual financial checkups for employees to help them obtain their financial goals. Constant reinforcement is necessary for a life-long behavioral change.

Managers should not underestimate the power of making employees feel that the company has their best interests at heart. Employees who learn how to manage their money from their employer, and then see the benefits, will be happier and more loyal.

In the face of such widespread financial illiteracy, every company should also want to do more to fight the problem. After all, poverty is a huge drag on economic growth.

In my experience, people in management roles consistently overestimate what average Americans know about finances, and how much they earn and save. Take the time to find out where your workers stand, and more than likely, you won’t be able to set up a financial literacy course in your workplace fast enough.