The Importance of Financial Literacy During the COVID-19 Pandemic

​The rise of the global COVID-19 pandemic has caused economic repercussions across the United States. Efforts to contain the spreading coronavirus have caused a surge in layoffs, resulting in the loss of jobs in a variety of industries, including restaurants, bars and entertainment venues, airlines, hotels, automakers and manufacturing. U.S. stocks saw their biggest weekly drop since the financial crisis of 2008. U.S. Department of Labor figures from late March showed that the record for the most new unemployment claims filed in a single week was shattered. Suddenly, there are more jobless Americans than during the Great Recession or in the aftermath of major natural disasters such as hurricanes, wildfires and floods. 

There have been some attempts to alleviate the immediate problem, chiefly the $2 trillion economic stimulus bill (H.R. 748). In addition, the Federal Reserve, joined by other government agencies, has called on the financial services industry to meet the financial needs of people affected by COVID-19. Some of the country's largest financial institutions, including Citibank, Wells Fargo and American Express, have responded with measures to help their customers cope.

Another way to help American workers—now and in the future—is to improve their financial literacy. April is National Financial Literacy Month. To observe this during the current crisis may seem absurd or insensitive, but it is an opportune time to focus on the importance of employee financial education.

The Need to Improve Financial Literacy

More than 30 percent of the thousands of participants in a Charles Schwab assessment said they don't have a written financial plan because they think it's too complicated or they don't have enough time to work on one. More than 20 percent of people polled by the National Financial Educators Council said they don't have anyone to turn to for trusted financial guidance.

As a financial and HR professional, I believe that CHROs must forge partnerships with CFOs to improve the financial literacy of employees. I have seen many of these partnerships succeed. Organizations whose HR and finance functions work together to meet the growing demand for financial and compliance training can realize valuable returns on this investment in collaboration.

Loyalty to a company often depends on the company's consideration for the financial condition of its workforce. Global consulting firm PwC showed this, especially with respect to the young workforce, in its 2019 Employee Financial Wellness Survey. Forty-six percent of Millennials and 44 percent of members of Generation X (compared with 30 percent of Baby Boomers) polled in the survey said loyalty to their employer was influenced by how much the company cared about their financial well-being. Majorities of all three age groups (81 percent of Millennials, 75 percent of Generation X and 52 percent of Baby Boomers) said another company that cared more about their financial well-being would be more attractive to them.

More than half of employees surveyed for a 2017 report from Bank of America Merrill Lynch said they want their employer to provide them with financial literacy education to boost their own financial wellness.

When Numbers Are Down, People Are Down (and Vice Versa)

Financial and physical wellness are directly linked. Financial stress—now aggravated by COVID-19—is the leading cause of lost productivity, unplanned absences, lower job performance and greater distractions among employees. According to a 2017 study by global health and wealth consultants Mercer, employees' worries about money cost employers an estimated $250 billion per year.

In replacing a stressed employee, a business can spend 50-60 percent of the employee's annual salary; the actual total costs associated with this turnover can range from 90 percent to 200 percent of the employee's annual salary, according to a report from SHRM Foundation, Retaining Talent: A Guide to Analyzing and Managing Employee Turnover.

The Current Crisis

The current crisis is especially stressful, as the value of 401(k)s, savings accounts and investments are way down, and millions of employees are working from home, losing sleep and, ultimately, losing productivity. Financial stress impacts emotional and physical well-being. National Financial Literacy Month is an opportunity to help everyone in your organization get on the right track to their own financial wellness.

It's important to educate employees who are affected by COVID-19 about the Families First Coronavirus Response Act (H.R. 6201), signed into law March 18. The measure will provide paid emergency family leave and paid sick leave in certain circumstances.

HR departments should use this time to review and revise sick-leave policies under the Family and Medical Leave Act (FMLA) with the help of knowledgeable employment counsel. Changes can be promptly communicated to employees in writing in a simple format, such as a question-and-answer document.

The Benefits of Educating Employees About Finances

As a CFO, I fact-check concepts and make informed decisions using numbers. These are my findings: Having a financial literacy program is good for your company's bottom line. It can do more than improve financial literacy; it can increase productivity, boost job satisfaction, and save on the costs of health care and turnover. If your company does not have a financial wellness program, then it's high time to consider adopting one.

A lot of vendors in the market can help you establish a financial wellness program. It can be coupled with modern digital solutions and human support.

The rise of self-service applications, machine intelligence and e-learning approaches allows providers to deliver personalized education to employees when and where they want it. Decision-support tools built into mobile apps help users analyze 401(k) savings, develop plans to reduce student loan or credit card debt, and project how health care costs and taxes will affect their retirement nest eggs. Other platforms emphasize online learning.

Larger organizations use many kinds of vendors to address the topic of financial wellness—credit unions, employee assistance programs, defined-benefits providers, even personal financial advisors.

Resources to Use Right Now

If you do not have the bandwidth currently to work on a financial literacy program, you can still provide resources to employees via your shared network to get them started. I suggest the following tools on these websites:

• MyMoney.gov: Learn about the five building blocks for growing and managing your money.
• MoneyManagement.org: This resource lists 30 steps designed to help employees identify their financial weaknesses and turn them into strengths.
• ConsumerFinance.gov: This site offers a number of steps employees can take to help protect themselves or their loved ones financially, in both the short and long terms, from the impact of the coronavirus.
• Debt.org: Some of the relief services employees might be able to take advantage of at specific banks and credit card companies are described here.
  

With a variety of measures, we as HR professionals can help alleviate the burdens of the ongoing pandemic. Let's transform this crisis into an opportunity to help employees and employers unite for a better tomorrow.

Archana Remane Dhore, CPA, SHRM-CP, is the chief financial officer of RiVidium Inc., in Manassas, Va.