Financially literate employees are good for employer’s bottom line
Are businesses’ profits down because employees are stressing about money? Can increased employee financial literacy increase employer profits? If you ask the Personal Finance Employee Education Foundation (PFEEF), the answer is a definite YES.
According to PFEEF, raising income levels will not address the problem. I guess someone who is irresponsible with $1 will be the same with $1,000,000, though they may have more fun with the latter. All joking aside, I think the PFEEF makes some very interesting arguments for why employers should offer financial education for their employees. Though it’s a U.S. organization and some of the references and research are not relevant to Canada, the basic concepts certainly seem applicable to Canadian employers as well.
The PFEEF is a not-for-profit private foundation established in 2006 for the scientific purposes of serving the public interest for non-commercial purposes by educating employers on the bottom-line benefits of workplace financial education that improves financial literacy and personal financial behaviors (read more). The organization attempts to identify the best work place financial programs and help employers understand the benefits of employee financial education. You can watch a six minute video Employers Profit When They Care About Financial Literacy to better understand their position.
The top 3 messages I took away from the video were:
A financially stressed employee can cost an employer $450-$2100 annually.
1 in 4 employees are financially stressed.
For every $1 spent by employers on financial education, they gain a return of $3 or more.
One point I question is whether an employee who spends work time stressing about financial matters would simply spend it stressing about something else if you took away their financial concerns. That said, in this recession employers are looking for ways to cut costs and improve profits. Perhaps a workplace financial literacy program could help do both.
Do you participate in a financial education program at work? If so, I would love to hear your stories, tips, and suggestions based on your experience.
Are you interested in having a work place financial education program? The PFEEF site provides materials to help you convince an employer to implement one. If you make a pitch, please let us and our readers know how it went by leaving a comment or sending me an email.
I need to give credit to the Pre-retiree investor education outreach project group from the North American Securities Administrators Association. The group members introduced me to PFEEF during a strategy meeting a couple of weeks ago. The project group is a hardworking team of individuals dedicated to helping investors become more financially literate.