I realized we had a problem when a new hire asked me if she could have her paycheck deposited directly to her parents' credit card. Come again?
This wasn't the first time I had fielded a red flag question about managing personal finances from an employee, but it was certainly the most eye-opening. I did some casual polling around the office about whether there might be any interest in a brown bag lunch on Personal Finance 101. A few days later, almost the whole company turned out to hear me opine about things like active and passive earnings, FICO scores and applying for loans. I taught from my own experience and favorite books—and the response was overwhelmingly positive. Over time, we expanded this education into a modified version of open book management, where we shared almost all of our finances (good and bad) with our staff.
How financially capable are your employees? If they're anything like mine were before we started teaching them, the answer is not very. This isn't necessarily their fault. High schools and colleges long ago stopped making financial literacy a requirement for graduation. If you're lucky, your parents gave you some kind of idea about how to successfully manage your money before you entered the world of runaway personal debt.
If you run a successful business, you generally have a good idea of how to manage money within your company and your household. Why should it matter to you that your employees can do the same?
- If your employees can better manage the money they make, those extra savings will be a bump to their bottom line. You'll be giving your employees useful life skills they can apply beyond your company.
- By helping your employees learn about managing their finances (this includes concepts like retirement planning and budgeting), they can hopefully put a great financial plan in place and reduce their money-induced stress.
- By giving your employees tools that few others have, they can now teach their spouses, children and friends sound financial skills. Taking the ripple further, you are helping society and your country by educating people in a necessary but under-taught set of life skills.
Your employees' productivity goes up at work, partly because of the above items, and partly because they better understand how the company works and how they can affect change.
When you teach your employees about money, it's critical to start with your goals. As a manager, it's important to know why you want your staff to know about money. Do you want them to have better control of their personal expenses? Do you want them to be better stewards of company resources? Do you want them to focus on selling a better mix of products and services? All these goals are valid, and frankly, they'll all be byproducts of a good financial education.
The second step is to assess your employees' current knowledge. While some are well aware of the company's finances, they might be lacking in personal finance skills. The inverse could be true as well—they might know their own finances well but they don't necessarily know how the company makes money. Once you know what they know and what they don't, you can customize your lesson plan.
Your lesson plan should include these items, but feel free to add and customize as you see fit:
- Begin with their personal finances. Start with the Give, Save and Spend concept (the children's finance concept where kids split their earnings into these three baskets), then address borrowing and how debt can threaten financial stability.
- Explain why they need to pay down their credit card debt and start to stockpile a safety fund.
- Push retirement savings and explain the benefits of long-term investing.
You can get more detailed as you discuss different kinds of debt and different ways to invest, especially as your employees become more excited. Once their personal finances are in order, you can discuss how your company makes money, how you spend money and how every employee can help increase the bottom line.
A final note, I'm sometimes asked, “What if my employees are so financially empowered that they don't need their salary anymore and quit?" While I suppose that's one outcome, I suppose we should all be so lucky to have employed people who are so astute and successful. If anything, if these rock stars are able to make themselves so financially secure, they will most likely have some great ideas for your company as well.