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How to Cultivate Employee Financial Literacy

By | Elaine Bennett

While we consider money management to be an essential life skill, many individuals lack it in the modern world. For that reason, an increasing number of companies are deciding to implement financial literacy programs for their employees, hoping to keep them informed and help them make smarter financial decisions.

Apart from improving employee finances, these programs have proved to be quite beneficial for business as well, leading to reduced stress, higher productivity and focus, less absenteeism, greater loyalty and retention, and more. If you’d like to experience the same advantages, here is how you can develop the right training program and cultivate employee financial literacy:

Pinpoint spending triggers

Tracking regular expenses is one of the most important aspects of good financial management. But apart from the essential aspects such as rent and groceries, most of us overlook smaller expenses such as subscriptions and services. Teach your employees how to identify and minimize them for higher success. Similarly, we may experience physical and psychological triggers that force us to overspend throughout the month, like grocery shopping when hungry or shopping online when bored. Although subtle, recognizing these triggers can go a long way toward reducing regular expenses and enhancing financial literacy overall.

Focus on budgeting tactics

Once your employees have understood expense tracking, budgeting will be another crucial aspect of financial education. This enables them to live within their means and achieve their financial goals. The simplest budgeting tactic to go over includes creating a typical income and expense sheet, where team members should also learn to identify how much they owe and the interest they are paying. Other budgeting tactics to mention include the 50/30/20 rule, the envelope method, zero-based budgeting, and similar options. Utilizing money management applications such as Mint and YNAB can also be of great help.

Teach about different loans

Regardless of their salary, chances are high that your employees will have to take out a loan at one point in their lives, whether it’s to buy a home, pay a large expense such as a wedding, or even cover emergencies. That is why it’s important to teach them about the available options they have beyond the traditional solutions offered by banks. For instance, a respectable lender such as Jacaranda Finance will be able to offer personal loans for smaller amounts. With a quick online application and approval process, this type of loan can be ideal for covering any unexpected expenses.

Go over investment categories

The opportunities for investments are truly endless, but your employees should at least be familiar with the most basic options that are available to them. For example, any good portfolio will include a savings account and an emergency fund, along with a combination of long-term and short-term investments. The most common low-risk options include corporate bonds, mutual funds, index funds, preferred stocks, fixed annuities, etc. There are many other asset classes you could consider mentioning; the choice will likely depend on the individual’s preferences and willingness to take a risk. Learning about investment possibilities is vital for building wealth in any case.

Cover debt-reducing methods

No financial literacy training can be complete without explaining the different methods used for effectively reducing or completely eliminating debt. After all, debt is often the main aspect negatively affecting financial health, which is why minimizing it is so critical. Concentrate on the two most common ways of paying off debt. The first one is the debt snowball tactic, where individuals pay off the smallest debt in full first, and then move on to the next smallest one. The other method is debt avalanche, in which minimum payments are made on all debts each month, with any extra money going to the debt with the highest interest rate.

Invest in helpful resources

Whether you decide to teach these aspects of financial literacy through meetings, seminars, or any other conventional methods, a presentation alone may not be enough to promote financial health. You should also consider combining this education with helpful financial wellness tools that will encourage employees to take necessary action and effect lasting change. For instance, you can give your staff a list of the best financial management apps, provide one-on-one financial coaching opportunities, or offer more specific resources that will allow them to minimize their debt. Every additional tool will provide a deeper understanding and help to develop money management skills.

Providing a paycheck is no longer enough to reach success in the world of business. You have to utilize the helpful tactics mentioned above, educate your employees about financial literacy, and enable them to achieve their financial goals in order to build loyalty and thrive as a company.

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