Q: Last week you wrote about how employers who provide basic financial literacy to employees are helping not only the employees but themselves. The rationale is that once employees are relieved from financial stress and worries, their focus and productivity improves. Everyone wins.
But what if an employer wanted to not just help employees avoid financial mistakes but also to thrive financially, which specific topics would you recommend?
A: That’s very lofty of you. Kudos.
As I covered last week, I’m a big supporter of financial literacy and consider it an essential life skill. Everyone should have a clear understanding of how to figure out if you should rent or buy a house. Or whether to accept a fixed or variable interest rate. Or why it’s almost always better to buy than to lease a car. Or why it’s better to take a few months to save up for that dreamy $2,000 cruise and pay in full on your credit card instead of charging it on and paying it off in a year. (You should be fully aware that the cruise will now cost you closer to $3,000.)
But once the basics -borrowing, saving, budgeting- are covered, I would say the next most important things to learn are: 1) making the most of your 401ks or 403bs, and 2) how investing works.
I was fortunate to always work for good employers who had generous matches on their 401k. (For the uninitiated, that’s when the company will match the employee retirement saving contribution up to a limit, usually 6%).
And I was amazed how many employees didn’t take advantage of the company match and left money on the table. For someone making a modest 20k salary that’s $1,200/yr (tax free!) that they were passing up. I did my best to educate anyone who would listen.
I also credit the fact I started saving early in my career (and that I’m a tightwad, and made decent money) with my ability to leave the corporate world by age 45, debt-free. But I digress.
Learning about investments (what’s compound interest? What are index funds?), and maximizing your 401k (saving pre-tax vs. saving after-tax, What’s an “employer match”?) would be the two areas I would offer for more advanced training. Of course “Basic Financial Literacy” would be a pre-requisite.
©Copyright Eva Del Rio
Eva Del Rio is creator of HR Box™ – tools for small businesses and startups. Send questions to Eva@evadelrio.com
