Kudos to the state of Missouri on its proposal to require high school students to take a personal finance class in order to graduate, and to the House of Representatives for supporting similar instruction beginning in kindergarten, as recently reported in a local televised newscast.
This type of education is sorely needed right now. Financially speaking, it’s a pretty bleak world out there. Instruction on handling money will help young people avoid some of the financial pitfalls that have trapped many of their parents. Considering that Americans spend $1.22 for every dollar they earn, and the typical family carries an average of $10,000 in credit card debt, is it any wonder that personal savings rates have dropped to an all-time low of just 0.4 percent?
In the next 20 years, more than 75 million people will retire from the American workforce. They will be joining the more than 35 million Americans who are already 65 years old or older. Medical advances and overall better health has Baby Boomers living well into their 80s and 90s, with close to 25 of those years spent in retirement.
That’s a long time to be living without a paycheck.
And yet, according to a recent Hewitt and Associates study, only 12 percent of employers feel their employees are taking responsibility for their retirement future – a staggering 82 percent report their employees will NOT have sufficient savings to retire. The No. 1 reason employees gave for not saving more? They say they simply can’t find any extra money to save. No wonder a study conducted by Virginia Tech found that one in four American workers is seriously distressed over their finances.
Providing Financial Literacy Education for kids is clearly very important. No one wants to see their child face a lifetime worrying about money. Providing Financial Literacy Education for adults is also a front-burner issue for many corporations in the country.
Last week, I attended the annual Society for Human Resource Management conference in San Diego to learn the trends and concerns human resource and benefits directors around the country are dealing with, to put faces and voices to the statistics.
Of concern to corporations today is how to cut future retiree costs, which could mean eliminating health care and retirement benefits and services. Many companies are even looking closely at how they can eliminate benefits for existing retirees. This is going to put a lot of pressure on employees to save even more for their own futures.
With personal savings rates at historic lows, companies are working to encourage employees to save more. Automatic enrollment in 401(k) plans are seen by many as the solution, while others see problems with this option, such as potential liability issues and the creation of more top-heavy plans. In addition to potential problems, employees are currently already borrowing the maximum amounts allowed by their plans – and the reason most often given is to pay high credit card debts. Many conference attendees stated this will become an even bigger problem as the new bankruptcy laws take effect.
At the SHRM conference, there was a lot of talk in the sessions about how employee stress is negatively affecting corporations. It is estimated that stress is costing corporations $7,000 per employee each year in lost productivity, but many at the conference were saying the cost is probably much higher and is expected to dramatically increase health care costs. And they stated the leading cause of this stress is personal financial problems and worries.
The consensus among conference participants is preventative solutions are the best solutions, and recommended corporations offer more Work/Life programs to help alleviate the stress. But Employee Assistance Providers at the conference said they have no solution that is preventative. They further stated they do not have time to work with people who “just” have money problems – they are already swamped helping people whose money problems have escalated into gambling addiction, substance abuse, divorce, workplace violence – the list was staggering, and disheartening. The term “preventative” just isn’t in their vocabulary.
Clearly, it’s time to add “preventative” to the corporate vernacular. Just as more educators are embracing the idea of teaching personal financial skills to youngsters to prepare them for adulthood, more corporations are finding that offering unbiased financial management classes to their employees helps their workers gain control of their finances – which relieves their financial stress and allows them to concentrate more fully on their jobs. And that boosts productivity and the company’s bottom line. Providing Financial Literacy Education is like giving each employee a pay raise, without increasing payroll by a dime. Employees learn to save more money, companies are able to make more money, and everyone can look forward to a more financially secure future.
After all, today’s grown-ups don’t want to spend their golden years as a burden on their adult children anymore than their kids want mom and dad to be forced to move in with them.
About the author:
Alice Whinnery is the CEO of the LFE Institute, which has provided Financial Literacy Education to more than 250,000 employees in the corporate marketplace since 1986.