.Let’s Close the Financial Literacy Gap

Small businesses have a stake in helping their employees learn more about money.

As I wrestled with my English homework at the kitchen table, my father would remind me that “knowledge is power.” He knew the hours I spent cracking the books would translate into a myriad of opportunities in my adult life. Both my parents worked hard to foster a lifetime commitment to learning that enhances every aspect of my day-to day existence and informs how I relate to my own children.

Today, education remains a high priority for most parents. We agonize over whether to send our sons to public, private, or charter schools. We demand that teachers provide our kids with a solid foundation in the core subjects of reading, writing, and arithmetic. We lobby local school boards to expand science education, bemoan cuts made to art and music programs, and nag our daughters about finishing their math problems.

While in the past few decades there have been some significant changes to education, there remains a critical gap in our children’s education: money and finances. We’ve completely failed to incorporate financial literacy programs into their education. This oversight doesn’t just affect eight-year-olds struggling to stretch their allowance. It can have lifelong consequences for kids of all ages: teenagers who run up impossible cell-phone bills, young adults who wrack up crippling credit-card debt, parents who take on overly large mortgages, and grandparents who can’t afford to retire. It baffles me that we continue to graduate high school seniors with no practical knowledge of money whatsoever.

Why talk to our kids about the dangers of drugs, but tiptoe around the subject of dollars and common sense? I think the reason may be pride. Parents often do not understand their own finances — much less the global economy — and they are too embarrassed to admit it. But if parents don’t teach their sons and daughters directly about money, children are forced to learn through osmosis or eavesdropping on tense arguments about overdue bills.

Society’s failure in this area has a lasting impact on us as adults. Every day we are bombarded with “expert” financial opinions from magazines, papers, radio stations, and 24-hour news channels. Since we don’t have the knowledge or criteria to make sound judgments, we often wind up selecting our personal financial gurus based on how little they force us to question the family mindset we absorbed as children.

We can demand financial reform from Wall Street, but I’m convinced the only thing that can save us individually and collectively from financial ruin is if more of us become financially literate. If people were more intelligent about money, they would make smarter choices and be less likely to make big mistakes at home or work. A recent study by the Federal Reserve Bank of Atlanta linked financial literacy with the likelihood that a borrower would fall behind on their mortgage payments during 2006 or 2007. People who tested in the lowest group for financial literacy spent twice as much time in delinquency and were two-thirds more likely to experience foreclosure.

This is a cultural problem, and neither our educational system nor our parents are up to the task. And that’s where small business owners come in. If employers want to make a meaningful difference in the lives of their employees, beyond providing a living wage and a reasonable package of benefits, they should teach them something about money — not just because it’s a nice thing to do, but because it will improve their business.

A lack of understanding about money affects the home lives and work lives of both employees and customers. Money is one of the primary reasons couples fight and get divorced. Money issues cause anxiety and depression. Some employees worry about their finances every single day. And according to a survey by Thrivent Financial, two-thirds of those surveyed also worry about the finances of parents or siblings.

Gaining a better understanding of money will make employees less anxious, more focused and productive, and could ultimately lead to greater company revenue and profitability. Such knowledge might lead them to participate more in the company’s 401(k). Providing financial education can reduce the liability an employer has when offering such a retirement plan, and can enhance employee loyalty. Most importantly, helping employees defeat their personal financial demons can significantly improve the quality of their lives.

Business owners can educate their employees about many topics, including investing, insurance, budgeting and saving, debt and mortgage, retirement planning, and college planning. Companies with 401(k)s should definitely offer educational programs about saving for retirement or college. But small businesses also can partner with a local credit union to offer their employees educational seminars. And, if employers want to provide comprehensive financial education as part of an overall employee benefits package, they can contract with a local financial planning firm to provide educational programs or interactive seminars that demystify money.

From Wall Street to Main Street, people who understand money fare better than those who don’t. Small business owners are in a great position to help make financial literacy a reality for their employees, and themselves.


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