Financial Education Will Improve Productivity in the Guyanese Workplace

Jul 02, 2017 News

---

Dr. Terence Smith, Deputy Governor, Bank of Guyana

 Financial stress and work

A review of the literature seems to confirm that money problems have become the biggest

contributor to personal stress and sleep deprivation.  Many individuals in Guyana and elsewhere experience financial strains at some point in their lives. In addition, many families say they live from pay-day to pay-day.

These stressors can negatively affect productivity in the workplace.  In fact, a study performed by American Express Retirement Services found that 60% of working Americans were experiencing moderate to high levels of financial stress.

According to FINRA Investor Education Foundation’s National Financial Capability Study, 60% of American households have less than three months of savings on hand.  The percentage is possibly higher for Guyanese households.  At night many families ponder how to make ends meet but these workers do not leave their money worries at home.

Multiple surveys offer ample evidence of the impact of financial stress on work.  For example, in 2012, one survey found that roughly one in five employees admitted they had skipped work to deal with a financial problem.  Among American workers in their 30’s and 40’s, stress levels are even higher.  A Met Life study indicates that many employees (40%) say that they want help in achieving financial security and (81%) say that financial problems have affected their productivity.

Implementing a workplace financial literacy program

It is apparent that in response to the financial stress of employees, many employers have provided workplace financial education programmes to help employees better manage their personal finances and improve their financial well-being.

In giving employees the information they need to manage money wisely, employers hope not only to increase productivity and profits but also to realize other proven benefits of employee-provided education.

In this regard, leading-edge Guyanese employers must take the lead in helping their employees learn to make better financial decisions.  Employees will appreciate employers who help them take control of their money not only through traditional benefit plans but also through financial knowledge and education.

Workplace financial education programmes increased financial literacy, increased retirement savings, and improved some financial management practices.

When you improve the financial literacy of the employees, it brings tangible benefits to both the employers and employees.  Employers have a number of options at their disposal when it comes to establishing a financial literacy programme in the workplace.  While much depends on the size of the organisation, many have existing resources that they can leverage for financial literacy training purposes:

• Leverage the finance and accounting department: There are many highly trained employees that have the knowledge and background necessary to educate employees about the basics of personal finance including budgeting and financial decision making strategies;
• Integrate financial literacy into employee training: Employment training is essential for a company’s success.  For example, many organisations provide pension training to provide employees with an in-depth understanding of the conceptual and practical issues related to pension and other benefit plans.  In addition, a number of employers are turning to online employee training for financial education;
• Partner with a local training organization: Many organisations consider the business partner approach to training financial literacy. In some cases, partners deliver financial literacy training and familiarize employees with for example, a curriculum called “Smart Money” and
• Munch and Learn: Munch and learn events are free financial literacy learning and networking events offered by many organisations.  These are semi-regular meetings with employees in place of a formal financial literacy education programme. For example, the Federal Reserve Bank of New has a formal financial education programme for employees including Munch and Learn events for employees.

Challenges and obstacles to financial fitness at work

According to one report, although financial wellness training appears to be growing, challenges and obstacles to wider adoption still remain.  Probably the number one challenge to employee financial training is overcoming senior management’s scepticism; would the time and expense for the financial fitness program be better spent on something else?  Another employer challenge is determining whether to keep the training in-house.  The costs involved could be significant, after adding in expenses such as content creation, facilitator training and travel.  Ensuring the program’s effectiveness is a significant management challenge as well.

Employees too have reservations about the programme and may be reluctant to discuss embarrassing financial information with co-workers or even with contractors hired by an employer to deliver financial education.

Another obstacle is that human resource functions may be viewed as a cost centre; some employers may also be reluctant to increase expenses, even in cases where strong benefit is likely.

Conclusion

The Organisation for Economic Co-operation and Development has developed several principles and good practices for financial education and awareness.  These include the promotion of methodologies for formal financial education program for employees.

In addition, financial education programmes that develop guidelines on study content and accomplishment level for each financial education programme and for each population sub-group must be promoted.

Official recognition of financial education programmes for employees should be considered, the mechanisms for delivering these programmes must be as important as the content; even though measuring the direct monetary benefit from workplace financial education is not easy.

Overall, the body of research confirms that leading-edge employers are helping their employees learn to make better financial decisions.  In fact, when you improve the financial literacy for the employee, it truly benefits the employers and employees.

Next week we will discuss credit reporting as it relates to financial literacy.  Thanks for all your comments and support.  As usual, please send your comments or questions to [email protected]

---

---