How Financial Illiteracy Affects Employees

According to Forbes, 33 percent of American adults have exactly $0 saved for retirement, and a further 56 percent have less than $10,000 saved.

These poor financial decisions and unhealthy habits are affecting the bottom-line of the organizations they work for in more ways than one.

Financially unfulfilled employees are less than ideal in the areas of productivity, influence, and job satisfaction. Worse still, financially unstable individuals are also more likely to switch jobs at even the slightest hint of a higher salary, with false hopes of solving their financial problems with a nominal salary increase. They may even leave to take a position with worse benefits than they currently have, further contributing to expensive turnover and replacement costs.

Addressing financial literacy with a financial coach

There’s no shortage of books, pamphlets, seminars, and online classes claiming to help pull people out of their self-created financial disasters. Although these can have varying outcomes, almost all of these programs are expensive and don’t guarantee any particular result.

Financial coaches guide employees through real-life scenarios such as:

  • Getting into a better living situation
  • Reducing credit card interest rates and balances
  • Increasing their credit scores
  • Paying off student loans
  • Being more financially fulfilled
  • Better understanding markets

Greater productivity in the long run

Financial wellness cannot be improved overnight, but in time, you’ll find that your workers are less distracted about their financial situations and more engaged with their work. Thus, resources such as a financial coach can help organizations improve their team cohesion, job satisfaction, and retention.

Although financial literacy may seem like an individual problem, employees don’t have to tackle everything on their own. At NetWellth, our clients save money through our 401(k) cost-optimization program and financial literacy platform.

CEO, NetWellth. Optimizing employee benefits costs & replacing conventional employee benefits services with our financial literacy and behavior change platform.