Build a culture of financial literacy & help employees understand key investing concepts

May 03, 2023

african american man talking to female employee

Eighty-five percent of Americans report feeling stressed about their personal finances, so it’s smart to assume at least some plan participants could use a little extra help addressing their biggest financial concerns.1 

Respondents to a survey by the National Endowment for Financial Education (NEFE) cited that saving for retirement is the second most common stressor, with nearly a third (31%) saying they’re worried about it. (In the number-one position is having enough emergency savings.)1

Stressed-out people are rarely at their best, and financial stress can create distractions that eat away at employee productivity and interfere with critical thinking and decision-making. That stands to make employees’ financial stress an employer’s problem.

Offering ways for plan participants to improve their financial literacy may help move the needle on their stress levels and have a meaningful impact on their overall sense of wellbeing. And that, in turn, could pay dividends in retention, attendance and productivity.

Along with personal finance basics like budgeting, banking, credit and debt, the fundamentals of investing are essential knowledge for everyone—and a lack of knowledge is a major barrier to success.

On the other hand, more financially literate employees may be more aware of financial consequences and engage in sound decision-making. With a better understanding of the “whys” behind saving, borrowing and investing, they may be more likely to engage actively in financial planning—and that can help them face retirement with greater confidence and less financial stress.

Plenty of room for improvement

Employee improvements in financial literacy and capability don’t just benefit the individual, but that’s where the good outcomes can begin: lowered stress, better focus, a greater sense of wellbeing and resilience, and maybe more free time for those who can eliminate side hustles that are eating away at their personal lives.

Better awareness of personal finance basics can even help some employees better understand some of the business finance fundamentals that drive decisions at work.

Understanding consumer and personal finance fundamentals like interest, inflation, good versus bad debt, budgeting and stress spending is essential to helping employees avoid the downward spiral of stress and debt. That’s an important place to start—but a plan to help employees feel more confident about their financial security in retirement should build on day-to-day personal finance with education on investing, too.

Key investing concepts to help employees improve their retirement readiness

It’s important to help employees understand first that they don’t need to become investment experts to successfully prepare for retirement. But a basic understanding of fundamental concepts can help them make the best use of resources they have, and avoid making mistakes that could expose their retirement account funds to greater risk than they actually want.

Consider a financial education program that covers at least these foundational topics:

  • Why and how to set investment goals
  • Making the most of an employer-sponsored retirement plan
  • The basics of stocks and bonds
  • The power of compounding growth
  • Asset allocation and diversification
  • Risk, reward and risk tolerance
  • Time horizon’s impact on investment strategies and choices
  • Rebalancing an investment portfolio
  • Consequences of borrowing from a retirement plan

It’s important, too, to make sure educational materials are developed to be easy for employees to access, use and understand. What’s convenient for one person might not appeal to another, so look for variety and choice in terms of learning opportunities and media formats. 

Promoting, and even incentivizing, participation can help increase employees’ awareness of financial education offerings. And new rule changes that came with the passage of SECURE Act 2.0 allow de minimis financial incentives not paid for with plan funds to promote participation in retirement plans.2 That allows employers to offer small incentive items—like low-dollar gift cards or company swag—which could spark some creative ideas about how to help nudge more employees to contribute to their employer-sponsored retirement plan accounts.

Caring for employees as whole people—not just workers

Demonstrating financial care toward employees can extend well beyond a paycheck. By helping people better understand, plan and prepare for their individual needs in retirement, employers can show that they value their employees as whole people, with lives that matter outside their workplace.

Learn more about how financial education programming can help improve employee experience and support greater retirement confidence. Click below to download our guide.

Download the Participant Engagement Guide

1NEFE, Americans Display Concern, Optimism in New Poll on Financial Well-Being, September 30, 2021., SECURE 2.0 Act of 2022, Title I – Expanding Coverage and Increasing Retirement Savings, December 19, 2022.