Financial illiteracy is worryingly widespread, among youngsters and older adults. A 2017 OECD study showed low scores among 15-year-olds when it came to basic financial questions. Similarly, a recent UK study from University College London and the University of Cambridge reveals large numbers of adults in England and Northern Ireland struggling with the basic mathematics of shopping.
Should you be concerned about this, and what are the implications for your employees’ retirement planning skills.
A Question of Responsibility
People have individual financial responsibilities, and must work out how to manage their own finances.
While financial responsibility rests on personal issues such as household budgeting and credit card use, it has implications for employers too.
The CIPD recognises this and is calling for more employers to engage with their staff over educating them in financial management.
This makes sense on several levels.
Firstly, if someone is in financial difficulty:
- This may impact on their performance at work
- They can feel distracted, or suffer from stress
- This may lead to absenteeism or long-term sickness
- It can affect productivity and workplace morale
Therefore, it is in the employer’s interest to help prevent these kinds of situations occurring.
Secondly, for increasing numbers of people, decisions about work are increasingly value-led. Employers who want to attract and retain talent must engage with their staff in ways that go beyond standard benefits. They need to show they care.
Supporting employees by educating them about managing finances and making important decisions about the future is demonstrating a level of investment in them as people.
What About Retirement Planning?
If large numbers of people are financially illiterate, can they make pension-related decisions that are in their best interests?
Many people have difficulties answering fundamental questions to do with inflation, compound interest, and risk, when it comes to their personal finances.
At the same time, there are large numbers of people who are inadequately prepared for retirement.
There is an association between this lack of preparedness and a lack of financial literacy.
Employers can take steps to do something about this by raising their employees’ awareness of retirement planning issues, in conjunction with improving their financial education through training
Yes, it matters if your employees are financially illiterate, but you can act now to change this.
Contact us for professional, independent raining that will engage and educate your greatest asset, your people.