Taking employee financial literacy to the next level
Financial literacy training benefits both employers and employees
A growing number of organizations are offering financial literacy programs in the workplace. Research has shown that raising financial literacy offer significant benefits to both employers and employees. For employers, it reduces absenteeism and decreases health benefit costs. It also makes the employer more attractive to prospective candidates. Both employer and employee benefit from overall improved job performance, lower employee stress levels, and a more dedicated and productive workforce.
Financial literacy programs typically include the bread-and-butter of managing money such as budgeting, saving, and investing. As wealth advisor who has worked with hundreds of individuals and organizations, I know that the “numbers” part of financial management is the easiest to master. A much more important ingredient for long-term financial success, both personally and within the organization, is understanding our individual relationship to money. Our relationship to money is likely the longest one in our lives—starting at a very young age and continuing to the very end. Whether you call it ‘money mindset’, or ‘money personality’, or the “psychology of money”, it has a profound influence on how we relate to financial resources in our personal and professional lives. When organizations optimize their financial literacy training to include resources on the psychology of money, employees can better manage the financial aspects of their jobs such as managing budgets, capital allocation, and performance-based rewards.
Money personality: It’s not about the numbers
Learning about the psychology of money is important because most of us are vague about what drives our financial actions. In a Canadian survey of nearly 6,000 households by the Financial Resilience Institute, the majority said that “saver” was their most dominant money personality. (A “saver” is defined as someone who vigilant and diligent about saving money and gets a lot of satisfaction from watching it grow.) The reality is different: a Canadians are more likely to be “Spendy Wendy” with almost 40% of the population having a no or negative savings rate. Money experts categorize different money personality types. For example, Claer Barrett of The Financial Times and author of What They Teach Us About Money, has distilled 7 types fancifully named “Jitterbug”, “Spreadsheet Steve”, and “Ostrich”. (You can take her quick money personality quiz here.) Ken Honda, a Japanese entrepreneur and author of Happy Money: The Japanese Art of Making Peace with Your Money, also divides people according to 7 types, including “The Gambler”, “The Worrier” and so forth. Everyone brings their money personalities and habitual attitudes and actions into the financial decision-making process. These habits can sabotage productivity. Imagine the potential discord that could be avoided in the workplace if a “Spendy Wendy” and a “Spreadsheet Steve” could find a common language to resolve a financial conflict on how to allocate the annual budget!
Takeaway: 3 key workplace benefits to understanding the psychology of money
- Each of us has a unique orientation to money. Understanding our money habits can help to resolve workplace conflicts better.
- Organizations should expand financial literacy training to include a greater understanding of money personalities and how they show up in the workplace. This will optimize how employees make financial decisions.
- Each personality type has strengths and weaknesses. With a better understanding of these, managers can improve employee productivity.