What is the answer to financial literacy? A 10 points plan for CEO’s

Until we recognise the problem we will not work towards a solution. NZ is not alone when it comes to alarming statistics which relate to the impact on health and well being from inappropriate financial habits. “Many studies have demonstrated that financial knowledge has a direct link to personal well being. More accurately, that financial distress leads to health problems such as stress, irritability, anger, fatigue, and sleeplessness. These symptoms inevitably lead to the development of other more significant health problems that affect employee’s commitment at work.”(2013 Employee Financial Education Division – Aversa.J.  Associated Press (2008) Stressed over debt taking toll on health).

Point 1:

Understand the size of the problem and consider its impact upon society. Until we relate NZ’s appallingly negative health and wellbeing statistics to our equally poor financial habits, we will continue to underestimate the cost in time, money, and misery for corporates, businesses, families and individuals. Suicide rates, anti depressants, heart and cancer, family violence, absenteeism – we lead the way in the OECD.

Our debt to income ratio is at the highest it’s ever been, so is our non mortgage related debt. Pressure to reign in spending, pay down debt and deal with other financial issues – such as children’s education or looking after elderly parents – is weighing on many people’s minds.

Point 2:

Recognise that our children get their scripting and financial habits from watching and listening to their parents. There is no point in educating our children and ignoring Mum and Dad. We need to educate Mum and Dad, and the best place to do that is at work. The kids will follow.

Point 3:

Employers need to understand that when people are worried about money, it’s often difficult for them to focus at work. Studies show financially stressed employees spend hours dealing with personal financial issues while on the job. When this happens, productivity drops and engagement falls. Some people come in and don’t get much done and others just don’t bother coming in. One in four employees is financially stressed – 61% say that worrying about money is their No1 Stressor.

Point 4:

It’s been shown that educating employees – using an experienced, well qualified financial educator – on how to manage their finances properly can alleviate much of this stress. However, the discussion around employee finances must focus on more than superannuation (KiwiSaver), and medical plan (Southern Cross). Employees have much greater complexity with financial well being needs.

Point 5:

Education needs to be comprehensive; it must include a range of topics from managing debt to taxation and income planning as well as estate management. Information is not education. There are numerous informative websites and financial planning tools available for the inquisitive – but education is needed to convert information into true learning and understanding. Habits don’t change from information.

Point 6:

Diversification of education methods is necessary depending on budget, time, accessibility, size of businesses and participant numbers. For some organisations group workshops could be more effective – for others, webinars or online videos and work books, or one on one training.

Most employees don’t take time to seek out help on their own. Research shows that employees want to receive this type of education at work and from a professional organisation capable of providing a complete range of financial products and services. A holistic education package delivered by impartial educators.

Point 7:

Preferred employee formats to receive financial education: (in order)

1. In person seminars/workshops
2. One on one coaching
3. Live webinars
4. Self study – video and tutorial
5. Self study – work book and guide
6. Social media
7. Blogs/email/newsletter articles

All recipients want to know that the training organisation understands their needs. Feed back questionnaires are therefore vital. Before, during and after the education programme.

Point 8:

The use of an accredited financial educator providing the education is critically important. A certified financial planner (CFP) has both the academic and practical experience to ensure information and training is appropriate and well-researched. It’s hard enough to get employees engaged – you don’t want them focused to products or getting wrong information.

Point 9:

The benefit and reward of a financially literate workforce, and reducing personal financial stress has several work related benefits for employers:

• Increase in productivity
• More engaged workforce
• Better mental well being
• Less absenteeism and presenteeism

“Most CEO’s can link back to their own family. Lots of senior people have kids who have all the wrong habits around money. Financial literacy can help their own life and then they see how it will be able to help their employees” (Don Stewart – Sun Life Financial)

Point 10:

What education do employees want and need?

• Setting and achieving goals
• Building a net worth statement
• Building a cash flow statement
• Income and debt management
• Determining life insurance needs
• Retirement planning
• Investment management / Confidence
• Tax planning
• Creating a will, Powers of attorney and Trusts

Summary

1. Understand why the problem is escalating and how solutions can be win/win
2. Solve the problem through impartial at work education – pass it on through Mums and Dads
3. Inform employers about the at work costs of financial stress
4. Choice of educator is important (the organisation chosen to run the programme)
5. Comprehensive  financial education is necessary – not product sales
6. Diversification of education type may be necessary. Workshops or webinars
7. How and when employees like to receive the education and their priorities
8. Qualified trainers (AFA/CFP) – the organisation is important but so to the personnel
9. How does a CEO relate productivity to caring (conscious capitalism)
10. What the extent of education needs to cover. Diversity of need and feedback to the employer.