Financial Education for employees? The business benefits of good citizenship

Should businesses be providing general financial education to their staff?

Martin Upton, Director of the True Potential Centre for the Public Understanding of Finance (True Potential PUFin) at The Open University Business School.

Research undertaken by Secondsight (1) found that 67% of the working population receive no financial education from their employers. Only 20% of employees had a coherent financial plan and a third claimed to have only a vague idea about money management. Half of employers surveyed said that their staff had asked for help with financial education.

Clearly there is a financial education gap that needs filling – but why should this be the responsibility of employers and their HR functions?

With the roll-out of auto-enrolment workplace pensions by 2018 all employers will have responsibility to offer access to pension schemes. With this should come guidance on the schemes offered and on the need for employees to augment their state pensions – particularly with the state pension age moving higher. Supplementing pension provision with workplace savings schemes is a logical further development employers should consider. Additionally the process of providing guidance on pensions and savings feeds through to other aspects of financial education. Assessing how much income is needed in retirement requires budgeting skills and an understanding of taxation. In effect pension guidance is a stepping stone to wider financial education.

Providing help is clearly good citizenship but it is good business sense too. Money worries are anecdotally one of the most common causes of keeping people awake at night. Certainly financial competence reduces the risk of getting into money problems and is therefore conducive to greater productivity by reducing stress levels. Research by the University of Warwick shows that happy employees are 12% more productive than the ‘average’ employee (2).

There are other potential benefits. Providing financial education is perceived as an employee benefit and can help with employee retention. Additionally, assisting with pension planning will help the transition to retirement of older employees. This would help with succession planning by providing further options for younger employees that might otherwise not be available given that the compulsory retirement age has been abolished.

Although most employers do not have the resources and skills to provide financial education there are freely available services to help provide support. The Money Advice Service and Age UK provide simple and easy to use on-line financial tools.

Additionally the Open University Business School’s True Potential Centre for the Public Understanding of Finance (True Potential PUFin) provides a suite of short courses on personal financial management that are free for everyone. These can readily be used to support employer-based financial education programmes.

Currently two courses, ‘Managing My Money’ and ‘Managing My Investments’ are available on the Open University’s social learning platform OpenLearn, and are regularly presented on FutureLearn.  Both platforms are free to access, but OpenLearn is permanently available and enables users to learn at a time, pace and place that suits them, whereas FutureLearn courses are run to a schedule, and therefore may suit learners who are motivated by a more structured approach.

Managing My Money has also been adapted into a radio series by Share Radio that adopts a lively conversational tone.  Those taking this version of the course will be also be able to name a third party who can monitor their progress and collect their results. This was originally designed to give extra support for young adults studying the course at home, but importantly, makes it a unique resource for teachers, who are now tasked with weaving financial education into the national curriculum. This feature has also been welcomed by some employers are have been encouraged to take part by asking their staff to participate in the programme and acting as a third party referee.

Learners on both the OpenLearn and Share Radio courses receive a free statement of participation certificate upon completion which can be included on their CV, further boosting employees’ confidence in financial matters.

As organisations adopt a broader view of staff wellbeing with creative programmes supporting physical and emotional health, building morale by helping society through CSR programmes, and adopting innovative working practices that enable autonomy and flexibility; could enhancing employees’ financial capability be a natural progression to build organisational reputation as a caring employer, while delivering commercial benefit through happier employees?

The True Potential PUFin Centre would be interested to hear the views of employers on this subject, please get in touch via our contact form.

References

• (1) Secondsight/Foster Denovo (2014) ‘Secondsight research highlights more than half of UK companies do not provide financial education to their staff’, [online] http://www.businesswire.com/news/home/20141007005466/en/Secondsight-Research-Highlights-UK-Companies-Provide-Financial#.VgUrh0uFODY
• (Accessed 14^th October 2014)
• (2) Oswald, A. J., Proto, E. and Sgroi, D (2014) ‘Happiness and productivity’
• Journal of Labor Economics (JOLE), 3^rd Version, February 2014