With the shift to home working and the broader challenges that the pandemic has brought, ensuring employees’ wellbeing is looked after has been a priority for employers. The past 12 months has seen a particular increase in attention that employers are giving to the financial wellbeing of their workforce.
Knowing how to manage personal finances is increasingly recognised as an essential and indispensable life skill.
The Organisation for Economic Co-operation and Development (OECD) defines financial literacy as the knowledge and understanding of financial concepts and risks, and the ability to apply this knowledge and understanding in order to make effective financial decisions.
Financial education can be described as programmes designed to equip people with the skills required to improve their financial literacy by teaching them to weigh up important considerations such as necessity vs. luxury or current spending vs. future planning when deciding how to allocate their financial resources. The movement to improve the provision of financial education in the UK is steadily gaining momentum, with moves to incorporate it into the national curriculum. In May 2021, a group of 40 MPs and peers signed a joint statement, urging the government to fund financial education for every primary school aged child in the country.
Despite this societal shift in attitude towards financial education, financial literacy remains low in the UK, and existing discourse focuses primarily on educating the youth or those still in education. Adults already in the workforce, who are no longer in a position to benefit from educational reform and policy, are frequently left out of this conversation.
Yet the need to provide broader financial education is really important as working adults have the most to gain, considering the number of financial decisions an average person has to make in their adult life. These include taking out loans and mortgages, vehicle financing, opening savings accounts and taking out credit cards. Adults are also exposed to organisations that directly benefit from their lack of financial literacy – debt collectors, payday lenders, high interest credit card companies and betting firms.
The risk for adults who lack financial literacy is not just poorly managed finances but also the possibility of total bankruptcy. Whilst this may seem an extreme position, this is, unfortunately, the reality for significant numbers.
The UK is facing a crisis in adult financial literacy. Research from the University of Cambridge and University College London has found that one in three people in England and Northern Ireland are unable to do even basic calculations such as working out the correct change from a shopping trip. The key question that arises is who should take responsibility for improving this situation given that after leaving formal education, there are few opportunities for adults to acquire this knowledge.
Employers try and address this by offering access to financial resources, but all too often it is done in a disjointed way. Some employers like to go through the box-ticking approach, and because they provide access to a service that badges itself as addressing employee ‘financial wellbeing’ they feel they have done what they need to. The reality is that they haven’t, as this service probably only addresses one aspect rather than the whole.
Although some employers do provide financial education, often this is focused on promoting the take-up of organisational employment-related benefits. Generic financial education, guidance or advice is rarely provided. A more beneficial approach for workplaces would be to strengthen the basic foundation of financial knowledge among their employees. One way of doing this could be by providing courses on foundational skills such as budgeting, borrowing, saving and investing. This could help in creating financial security for employees and would in turn lead to positive individual and social outcomes.
There has definitely been a change in the prioritising of financial education for children and teenagers.
But employers should also play their part in ensuring that no one falls through the cracks by providing basic economic literacy programs to their employees. A workforce that is able to manage its money would be better for society as a whole by contributing to stable and sustainable economic growth over the long term.
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