A major concern of employees during the pandemic has been concerns about finances. The year 2020 has been an extremely hard year for working-class people. Many of them are out of jobs. Those who do have jobs have to face the prospect of wage cuts or decreased commissions.
Even employees whose jobs have not been affected by the COVID-19 outbreak are worried about their financial security in the coming months. As such, it is time that employers across the world start seriously considering providing education about finances to their workers.
The necessity for education about finances
According to a study conducted by the U.S. National Endowment for Financial Education (NEFE), almost 88 percent of survey participants admitted that the COVID-19 pandemic is causing some serious stress due to finances. About 41 percent of the people were worried that they do not have enough money in emergency savings.
Nearly 28 percent revealed that they were mostly unable to pay their mortgage/rent and utilities. Some of them have taken on debt, which they are currently finding difficult to repay. More than 40 percent have lost any hope of improving their financial situation by next year.
Nearly 28 percent of survey participants revealed that they were mostly unable to pay their mortgage/rent and utilities. (Image: Screenshot via YouTube)
How do you think employees who are stressed out about their finances will perform? Obviously, they will have lower productivity. In fact, a survey by ORC International shows that American businesses lose almost US$300 billion every year due to employees feeling financially stressed out. “Employees with high levels of stress have 46 percent higher health care costs than employees with lower stress levels.
Even more interesting is the fact that a lack of education about financial matters relates to an increase in stress. When it comes to financial education, employees at organizations that did not offer financial education had stress levels 10 percent higher than those that were educated about finances,” according to Fleet Owner.
This is where the necessity of financial education programs comes in. If employees feel confident about their finances, they will be more mindful of their work, perform better, and bring more profits to the business. Plus, when employees believe that they have benefited immensely from the financial knowledge your business has provided them, their loyalty will also increase.
Focus areas
So how can you help your employees improve their financial management? There are four areas you should focus on teaching them — expense control, building savings, debt reduction, and tax benefits. First, teach them proper budgeting techniques so that the employees will have tight control over their monthly spending.
Teach them to limit expenses to a maximum of 70 percent to 80 percent of their income and send the remaining into a savings account. For employees who might not have the will to follow this plan, you can offer to withhold 20 percent to 30 percent of their pay so that it can be invested in their name in some asset class. This way, the employee can rest assured that he has a solid savings account growing.
First, teach them proper budgeting techniques so they can have tight control over their monthly spending. (Image: via Pixabay)
Next, teach them how to manage and even eliminate their debt. If the interest rates on some of their debts are high, you can link them with financial institutions that can provide refinancing at lower interest rates. You can also help them with preparing a solid debt repayment plan that aligns with their income and lifestyle. Finally, teach them the basics of how to save on their taxes.
Many employees waste a lot of money every year paying taxes that they can avoid easily by exploiting certain loopholes. For instance, if an employee has spent any amount on medical expenses, they might be eligible to deduct these from their tax bottom line. By saving on taxes, employees can increase their savings even more and feel financially secure about their future.
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