Financial education is a growing trend in the US – could the same approaches work in the UK?

USA

The slow but gradual trend towards employers offering holistic financial education that addresses personal debt as well as savings in the UK reflects trends in the US. 

Annamaria Lusardi of George Washington University in Washington DC, has seen a similar move by employers across the Atlantic. “While there has always been some interest in doing financial education around asset building, we have also seen more recently that you can’t look only one side of the balance sheet,” she says.

“Debt and debt management is also an issue and has an effect on workers’ productivity and wellbeing.” And, as Lusardi points out, for both the employer and employee, financial insecurity is a problem with immediate consequences – it affects employees in their day-to-day working lives.

There is no buffer to help to deal with financial issues”

Like the UK, many families in the US have become reliant on borrowing for daily spending. “There is no buffer to help to deal with financial issues,” says Lusardi. That can mean an apparently simple problem like a broken-down car prevents employees from being able to get to work, or means that they have to take a second job. 

“You can ask employers: ‘Have you ever had to fire or discipline an employee for finance-related reasons?’ If the answer is ‘yes’, then the employer needs to think about how to address that,” she adds.

Research in the US carried out by the Personal Finance Employee Education Foundation (PFEEF) – an organisation that provides support for companies that want to offer financial education – has also highlighted some of the employer benefits of financial education, albeit with a relatively small sample size.

“Our findings reflect what we’ve seen with other research,” says president and chief executive Judith Cohart. “Employers experience turnover and absenteeism from employees not handling their finances properly. The stress leads to an impact on personal health.”

There are many people who just don’t manage their basic finances properly”

According to PFEEF’s findings, although 81.8% of its survey respondents provide retirement-related education, 51.5% offer basic workplace financial education around budgeting, debt reduction and credit management.

While that shows a vast improvement on the 28% offering that type of advice in 2010 when PFEEF ran a similar survey, Cohart believes there is still a lot of work to do. “It’s about focusing on a basic understanding of how to budget, on basic financial literacy. Most financial education focuses on investment for pensions, but there are many people who just don’t manage their basic finances properly.”

Lusardi provides an analogy between financial education and the provision of benefits such as gym membership. “If an employer is prepared to offer gym memberships to help employees stay healthy, why not help with other aspects of their lives, such as financial literacy?”