Company leaders and HR teams inherently understand that their workforce should reflect their customer base and the world around them—but research reinforces the idea that a diverse workforce is good for business. The most ethnically diverse companies are 35 percent more likely to outperform their homogenous counterparts, according to McKinsey. Another study shows that companies that embrace diversity in the workplace enjoy a 2.3 times higher cash flow per employee than those that don’t.
For the companies that understand the benefits of diversity, the challenge is often attracting and retaining diverse workers. One valuable method for doing that is to provide a financial literacy program: While everyone can certainly benefit from financial education, studies indicate minorities are far behind their counterparts in climbing out of debt. A strong financial literacy program can attract diverse workers who seek companies that understand their values and arm them with resources to build their dreams.
Strong Demand for Financial Education
Today’s workers need financial literacy—but young and diverse workers need it most. Nearly two-thirds of Americans couldn’t pass a basic financial literacy test, according to the National Financial Capability Study by the FINRA Foundation.
The study also found that minorities and young adults are more likely to participate in high-risk financial behaviors: 39 percent of blacks and 34 percent of Latinos have used high-cost borrowing methods such as pawn shops and payday loans, compared with 21 percent of whites and 21 percent of Asians. Almost 30 percent of Millennials said they had been late on their mortgage payments, versus just 16 percent of those ages 35 and up.
That widespread lack of basic financial literacy is leading to a heavy amount of financial stress, which can cause employees to miss work or lose productivity. More than half of employees say they have been stressed about finances during the past 12 months, according to a Pricewaterhouse study. Almost half of employees who are worried about their finances are less productive at work, spending at least three hours each week dealing with personal financial issues.
Employers Can Make a Difference
A growing number of employers are attempting to solve the financial stress problem by offering workplace financial literacy programs. Employers have long offered information about benefits and retirement planning, and they can start by simply expanding those informational sessions to include other topics such as understanding student loans and education costs.
Diversity-focused employers can also help encourage financial literacy and awareness by offering automatic enrollment in retirement plans and by offering financial health checks and individualized coaching.
Many employers offer classroom-based and web-based training options on basic financial and retirement planning topics, targeted for different populations, including different age groups and underserved populations.
Consider partnering with outside organizations that are trusted by your diverse employees, such as churches, community groups or unions, to provide tailored financial literacy that will meet their needs.
Employers and Employees Reap the Benefits
Financial literacy programs geared toward the needs of employees can help them make informed decisions about financial priorities and boost their ability to meet financial goals. That can make a life-changing difference for those employees and their families, sometimes for generations to come.
But employees aren’t the only ones who benefit from employees’ financial literacy and improved financial health. Also, employers benefit because these improvements can boost employee productivity and retention.
Financially literate employees usually have less stress and more focus, allowing them to be more productive at work. In addition, lower stress levels have been linked to lower health care costs and absenteeism, which translate to a more productive workplace. And finally, financially literate employees have a better understanding of their employee benefits; for instance, they understand the value of their 401(k) plans, health and disability benefits, tuition and profit-sharing plans, and are likely better able to make wise decisions about managing those benefits and managing their career paths.
Offering a financial literacy program can be a low-cost way for employers to boost productivity, provide a needed benefit, and attract and retain a diverse workforce.