Financial literacy is a vital skill to have and understand, as it can dictate the way that you live your life.
If youâ€™re stressed about your finances or are living paycheck to paycheck, it can be difficult to think about the possibility of saving money. Learning how to navigate your financial state and understanding how to manage your money can help you better your current financial situation, allowing you to work towards a more secure future.Â
When people become educated about their finances, it can help to improve their overall quality of life, as well as give them more confidence in both their personal and professional lives. Follow along as we discuss the importance of empowering employees to become more educated on financial literacy.
The Importance of Financial Literacy
Financial literacy is the ability to understand and use different financial skills, such as knowing how to save and invest your money, as well as how to budget your money to create a more secure future for yourself. Financial literacy is an essential skill to have, and one that takes practice. Many people stress about their finances, and the root cause of that is due to a lack of understanding.Â
Impact of Financial Resources for Employees
Many companies have resources and educational tools available to their employees that they can use to learn more about money management and financial literacy. By encouraging employees to take steps towards utilizing the financial resources available to them, it can instill confidence in them as they will have the tools to understand their current financial situation, as well as how to work towards financial freedom.
Some resources that companies can implement include employee assistance programs (EAP) which can range from retirement planning guidance, debt counseling, and even providing access to financial planners. Retirement planning is essential to understand, as it allows employees to plan for their future and provide them with money to live off of after they retire. Understanding how to best invest into their retirement can put them on a better path, as theyâ€™ll learn how to invest and have more control over their investments as well.Â
In addition to that, employers can offer debt counseling through online learning or through personal financial planners as a way to teach employees how to manage their money and decrease their debt. Learning about different types of loans to improve debt management can alleviate the overwhelming stress resulting from numerous expenses to be paid off.
Debt consolidation loans, in particular, offer a promising solution for employees grappling with multiple debts, as it combines all their outstanding balances into a single monthly payment, streamlining the repayment process and enhancing manageability.
Offering financial resources to employees to encourage them to learn about their financial health and work to improve it can help employees decrease the everyday stress they may feel, and help them feel more supported by their employer.
When employees feel supported, they are more likely to work harder and stay at the company longer than someone who doesnâ€™t feel supported. When there is an effort to improve the life of employees coming from employers, it increases the overall retention a company has because that is seen as a company that cares about their employees.
How to Improve Money Management
A large part of understanding finances is knowing how to manage money. Itâ€™s important that when employees get their paycheck, that they break it down into needs, wants, and savings. Being able to create and stick to a budget can help to better improve money management, as well as create structure for them in their daily life.
Consider the 50/30/20 rule as a guideline for budgeting. This rule consists of setting 50% of monthly income into needs, 30% into wants, and 20% into savings.Â
When it comes to needs, this can include expenses such as housing, utilities, food, transportation, and healthcare. These are essential expenses that should be expected to be spent each month. These expenses may fluctuate each month depending on the situation, but itâ€™s important to write down all the essential bills so that when it comes time to pay, theyâ€™ll have the money to do so.
In addition to that, wants should also be factored into the budget. This can include anything that is nonessential, such as going out to eat, self-care, gym memberships, or even clothes shopping.Â
When considering a budget for wants, make sure that the plan is realistic, so itâ€™ll be easy to stick to it. Oftentimes people get strapped for money as a result of overspending on their wants without realizing it until itâ€™s too late. In order to avoid that, itâ€™s important to stay diligent about a budget and spending habits, and adjust those habits as needed to work for their lifestyle. The remainder of an employeeâ€™s paycheck, the 20% part of the budgeting rule, should be allocated to savings.
Setting aside money strictly for savings can help pay off any debts, as well as serve as an emergency fund or can be put towards retirement planning. By establishing and following this budgeting guide, it can help employees to properly allocate their paycheck in order to ensure theyâ€™re not spending too much, and also are able to still have a liveable wage.
Itâ€™s important to not only understand oneâ€™s finances, but also have the resources available to do so. Employers are now taking more measures to encourage employees to learn how to manage their money, how to invest their money, and how to reduce their debts through various educational resources.
As employees, itâ€™s important to take advantage of any learning opportunities as it can improve the knowledge and skills one has, setting them up for a more secure future.
This blog was contributed to Workplace Fairness on May 31, 2023. Published with permission.