How to cultivate employee financial literacy

Financial literacy isn't something that's commonly taught in school. Unfortunately, this oversight is costing employees their hard-earned money. A report from the National Financial Educators Council¹ found that financial illiteracy resulted in a loss of $1,015 for Americans in 2024.

Through tailored programs and accessible resources, employers can empower their employees to improve their financial decision-making skills. These skills can ultimately lead to greater job satisfaction and retention.

In this article, we’ll explore practical strategies to cultivate financial literacy among your employees, paving the way for a healthier financial future for both them and your organization.

In this blog post, you'll learn the following:

• Why the financial well-being of employees affects your organization.
• The benefits of financial literacy training for employees.
• How to bridge the knowledge gap by educating your workers on important financial concepts.

What is employee financial literacy?

Financial literacy is the understanding of and the ability to use financial skills such as money management and budgeting. It encompasses everything related to personal finances and investing, like taking out loans, retirement planning, saving money, and paying bills and other expenses.

Financially illiterate individuals frequently struggle with understanding essential concepts, like:

• Saving money
• Retirement planning
• Budgeting effectively

These challenges can contribute to heightened stress levels among employees.

Employee financial literacy programs, also called financial wellness programs, help teach your employees to make informed financial decisions. Your employees can walk away from a financial wellness program with a better understanding of their financial situation, how to manage income and expenses, and how to build their financial security.

Why should you put in the time and effort to introduce financial wellness into your employee benefits package? Improving your employees' financial literacy can help your organization in several ways.

Why is employee financial literacy important?

Financial literacy can help your employees plan for their future. It can remove potential stressors and feelings of uncertainty that often carry over into the workplace.

Your employees need to understand how to navigate some of the most significant decisions they'll make in their lives, such as investment opportunities.

In the past, many employers might have provided a pension plan for retirement, which required no involvement from the employee. Now, employees must know how to manage and set up retirement plans such as a 401(k).

According to Bankrate’s Retirement Savings Survey², 57% of working Americans feel behind on their retirement savings. Additionally, 48% of workers with a specific retirement goal in mind don’t think they'll be able to achieve it.

Stress about current and future finances can lead to distractions at work and increased absenteeism. It could also lead to turnover if employees look for a higher-paying job elsewhere.

What are some of the benefits of improving financial literacy?

Offering financial education to your employees can have a significant impact on your organization.

Benefits of improving employee financial literacy include:

• Improved focus and productivity at work
• Reduced stress
• Less absenteeism
• Improved employee retention

According to PwC's 2023 Employee Financial Wellness Survey³, 44% of employees feel distracted by finances at work. Another 56% of them say they spend three or more hours at work each week thinking about or dealing with issues related to financial challenges.

When employees better understand financial management, they can take steps toward improving their situations. When they don't need to worry about their finances during the day, they can focus more on their work, improving overall productivity.

Empowering your employees to improve their financial well-being can reduce stress, improve employee engagement, and even reduce healthcare costs. Reducing stress can lead to better physical health and mental health, which can increase employee satisfaction and morale.

When employees deal with challenging financial situations, they're more likely to be absent to deal with them. Helping employees overcome their financial hardships with financial wellness programs and employee benefits can reduce how often employees are absent for financial reasons.

An employee financial wellness program is a crucial employee perk that can affect recruitment and retention. Employees who see the value of your financial wellness program are more likely to stay at your organization instead of pursuing other opportunities elsewhere.

How to set up an employee financial wellness program

The most effective financial wellness or financial education programs are personal and comprehensive. They provide each employee with a complete picture of their particular financial health and support for taking care of short-term and long-term needs.

Such programs should help employees set financial goals and provide financial planning tools for managing them.

You can cover a wide range of financial concepts with your employees, including:

• Building an emergency savings fund
• Understanding credit scores
• Saving for retirement
• Good debt vs. bad debt
• Investment strategies

Now, let's go over how you can set up an employee financial literacy program.

Step 1: Establish achievable goals for your financial wellness program

The first step to a successful financial literacy program is to identify what you want to accomplish with the program.

Is your goal to reduce absenteeism rates or improve productivity? Or do you want to give your employees an additional incentive to stay with your organization?

Determining your goals for the program can help you measure the results over time.

Step 2: Determine what your program will cover

Now that you have your goals, you need to decide what topics your financial wellness program will cover. A good starting point is to ask your employees which topics would be most valuable to them. Are they more interested in debt management or comparing credit cards? You can gather feedback from employees with an anonymous survey.

You can also use any employee data or knowledge you already have to build your program. If you have many college-educated employees, you may want to offer resources for managing student loans, for example.

Step 3: Design the program

With your topics selected, it's time to design the program. You should determine how you will provide information and resources to your employees.

You can use a third-party employee financial wellness program or set one up yourself. Employee financial literacy programs can take many different forms, including classes, online groups, or one-on-one meetings with professionals.

Popular components of financial wellness programs include:

• Digital portals with financial planning tools and educational content
• Access to financial advisors who can provide one-on-one financial coaching
• Regular workshops such as financial education seminars or financial planning classes
• Budgeting apps that help with financial concerns
• Newsletters that focus on financial health

You also need to decide if your financial literacy training will be optional or mandatory for employees.

How offering employee benefits can reduce your employees' financial strain

Establishing an employee financial wellness program isn't the only way to support your employees financially. Providing employee benefits and increased compensation can help your employees live more comfortably.

There are many high-value benefits options available other than salary increases. Let’s review them below.

Offering health benefits

Medical bills and health insurance are often the largest contributors to personal financial struggles. People often don't have enough money saved to cover surprise medical costs or other unforeseen expenses.

Offering traditional group health insurance gives your employees access to coverage. However, it can come with a hefty price tag for organizations.

Thankfully, alternative benefits options are available that can provide value to your employees while saving your organization time and money.

Health reimbursement arrangements (HRAs) allow organizations to reimburse employees for more than 200 eligible medical expenses, including their individual health insurance premiums. You simply offer your employees a monthly allowance that fits your budget. Then, they make qualified purchases, and you reimburse them up to their allowance amount.

Some of the most popular HRAs available are:

• Individual coverage HRA (ICHRA)
• Qualified small employer HRA (QSEHRA)
• Group coverage HRA (GCHRA), also known as an integrated HRA

You could also offer your employees a health stipend. Health stipends work similarly to an HRA, except the allowances are taxable.

While HRAs are often a better choice for organizations, health stipends are a great option if you have employees who receive premium tax credits (PTC), as they'll be able to use their health benefits without affecting their PTC eligibility.

Offering your employees a health benefit can help them save money on their healthcare costs, contributing to their financial wellness.

Offering wellness benefits

Employers sometimes offer financial wellness programs as part of a holistic employee wellness program. Seeing as financial illiteracy and tough financial situations can increase employee stress, offering wellness benefits is a great way to promote healthy living without incurring additional expenses upon your employees.

A taxable wellness stipend enables you to give employees money for their wellness expenses, such as:

• Gym memberships
• Exercise equipment
• Meditation apps
• Fitness classes

This allows your workforce to de-stress and live healthier personal lives, which can improve employee morale and productivity in the workplace.

Offering education benefits

Student debts in the United States sit at $1.773 trillion, according to the latest statistics gathered by Education Data⁴. With an average debt of $38,375 per student, offering a student loan repayment or reimbursement benefit to your employees can help you attract college-educated talent.

Other education benefits include:

• In-house training programs
• Personal development courses
• 529 college savings plans
• Employer-sponsored scholarships

With this type of benefit, you can put a dent in your employee's student debt and show them that you're willing to invest in their continued growth and success at your organization.

Conclusion

When designing your employee benefits package, it's important to include financial wellness offerings, such as a comprehensive financial education program. By helping your employees make informed decisions about their finances, you can reduce workplace stress, which in turn enhances their productivity and fosters a more positive work environment. You can also offer an HRA for your health benefit to contribute to the physical and financial well-being of your employees.

This blog article was originally published on June 17, 2016. It was last updated on February 11, 2025.

1. National Financial Educators Council
2. Bankrate's Retirement Savings Survey
3. PwC's 2023 Employee Financial Wellness Survey
4. Education Data Student Loan Debt Statistics