How better financial ed for employees pays off

Employees may need financial education from your company more than ever.

Reason: Last year was a bad one for workers’ financial security.

The Trends in Employee Wellness study by Financial Finesse (PDF) shows that:

• Employees who have a handle on their cash flow fell from 72% in 2011 to 68%
• Employees with an emergency fund fell from 56% to 51%
• Employees paying their credit card balances in full each month dropped from 62% to 56%, and
• Employees paying late fees rose from 19% to 23%.

The worst news: There was also a troubling increase in employees tapping their 401(k) retirement accounts.

Last year, 32% of employees reported taking a loan or hardship withdrawal from their retirement plan – a jump from 25%  who did so in 2011.

Time for financial wellness

As we’ve said many times before, employees trust their employers when it comes to financial advice and financial planning. The problem is that employees frequently don’t for that advice.

While medical wellness benefits are the norm at most jobs, a financial wellness program that complements a company’s retirement benefits is even better.

Employees will definitely retain financial knowledge if it’s coming from the CFO or other finance professionals at the job. After all, the trust is already there.

Financial wellness will also help with productivity and could even save the company money as well. According to a Debt Relief Legally survey (PDF), when employees improve their financial well-being, their health improves, which means health care costs go down and productivity goes up.

Elements to a good financial wellness program

Depending on how your company is set up, it may be ideal for HR and Finance to provide information sessions for employees. Or it might make more sense outsourcing  the work to a vendor who provides financial training and online services with their own resources.

Either way, try to include these elements:

• Provide flexible options. Think of outside-the-box ways of presenting this information to employees. Older employees may appreciate the option of going to a live session with an in-person speaker, while younger employees may rather go at their own pace with online training.
• Challenge employees to make personal goals. Financial guru Dave Ramsey compares eliminating debt to losing weight, and it makes sense. A health-wellness program may set a goal for participants to lose X amount of pounds in a month. For financial wellness, challenge them to accomplish a personal goal in 6 months, like setting up a $2,000 emergency fund, or paying off a credit card balance.
• Use your own people. If you can, try to use finance staffers for an information session or two. Employees will be more at ease if they can get financial knowledge from the CFO, Controller or high level manager.