Low Financial Literacy is harming your employees. Here’s how to fix it.
The past five years have seen an explosion of fintech businesses who set out to change how we use, manage, and invest our money, but this makes knowing which one is right for you incredibly difficult. When it comes to investment platforms, there is still a lot of confusion out there. Have you opened an investment account with an online app? Did you get any financial advice before you invested? Do you know if you made the right decision? Usually, the first port of call when new to investing is to turn to the most popular apps, but popularity doesn’t always mean they are the best for everyone’s financial circumstances.
There are Stocks and Shares ISA’s where you select the level of risk you’re willing to take, platforms that allow you to invest your money into property via crowdfunding, savings accounts that lock up your money for a fixed period, stock trading apps where you can buy shares in individual companies, and let’s not forget the world of cryptocurrencies like Bitcoin. Whilst it’s great that there’s a push to get more of us investing through easy to use platforms, doing so without the right knowledge can be risky. The differences in investment vechicles can be massively confusing, and your employees may not feel like there is anywhere they can go to get impartial financial guidance, but they’d be wrong! Let’s dive into how you can support your employees to increase their investment knowledge to improve their overall economic outlook for the future.
The effect on employees and work
A low level of financial literacy amongst your employees may be having a detrimental effect, not only to their financial wellness but also to your business itself. A survey produced by OECD ranks the UK bottom for adult financial literacy. Professor John Jerrim (IOE) of UCL adds that “results bring into question how many adults in England really have the skills to make complex financial decisions.”
As we’ve discussed previously in our Money and Mental Health blog, low financial literacy can lead to increased stress, anxiety and other mental health issues. The effect of poor mental and financial health on your business can be numerous: absenteeism, presenteeism, a drop in productivity, and a strained working culture. If they lack financial knowledge, your employees are susceptible to risky products and services that pump money into fancy marketing campaigns but don’t deliver optimal results for their circumstances.
Aside from impacting your employees’ mental health and your business output, low financial awareness makes it easy for people to make the wrong decisions. How reliably can you decide to invest in individual stocks vs a passive fund if you don’t know the differences between the two, or what they are in the first place? What about the fees associated with investing – transfers and fund managers, for example? Do your employees know how their pension works and what they should be checking? What about combining pension funds from previous employers?
A common issue is that employees end up following the actions of someone else, but what works for others like friends and family, won’t necessarily be right for their circumstances. They could end up:
- Making unnecessarily risky decisions.
- Losing access to certain benefits and tax advantages.
- Not prioritising the right issues at the right time.
Addressing the gender gap
When it comes to investing only ‘23% of female adults in the UK hold an investment product, compared with 35% of men.’ Academics have given a range of reasons for this, including a higher percentage of women saying they “lack confidence” when it comes to “complex money-issues like investing, understanding financial language and ensuring enough money for retirement.” (OECD). This might be able to explain why fewer women make investments in the first place, or why they typically make more conservative investments than their male counterparts. Statistically, this situation leaves women in a far more vulnerable position – especially when it comes to future investment gains and financial security compared to men.
Stigma and confidential support
Your company culture makes an essential difference in how confident your employees are to seek help and ask for money-related support from their colleagues and the company. Having a safe space where employees can discuss in complete confidentiality their money concerns and receive tailored impartial advice will help to reduce the stigma people have when they are experiencing money stress. Companies that create an open environment that encourages people to speak freely about money and the related topics like investing, will often find that they have a higher uptake of employees actively using the financial wellness benefits provided to them. Plus, they’ll feel supported by the business in their efforts to get better with their money, especially when it comes to their long-term plans. Remember that when it comes to money – no question is a stupid question!
How you can help
Businesses who prioritise the financial education of their employees can benefit from a workforce that’s productive, engaged and focused.
The good news is that you can help to increase your employees’ awareness and confidence by carefully choosing which financial wellness solution you include in your employee benefits package.
Bippit is unique because we put financial education at the top of our agenda. We know that receiving confidential, personalised, and impartial financial guidance from experts is essential to increasing financial wellness, and combining that with financial resources which are tailored to the individual needs of each employee has a significant impact.
The ability to ask a personal advisor any questions at any time means that your employees will always have the ability to make informed choices for their circumstance and know why it’s the best option for them.