Employees don’t understand their finances. How do we close the knowledge gap?

To some employees, “financial security” can feel like an impossibility.

Since the onset of the pandemic, 91% of employees say they have faced a personal financial issue, whether struggling to maintain a household budget, reduce debt or build emergency short-term savings, according to research from Morgan Stanley at Work. But the roots of these financial issues had taken hold long before COVID entered our lives, says Uzrad Lew, founder and CEO of fintech startup Younity, formerly 2020 Capital.

“The biggest financial challenge employees are facing is the financial knowledge gap,” Lew says. “In America, 230 million people are living paycheck to paycheck, finding it very hard to make ends meet.”

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Inadequate financial literacy is a problem for the majority of Americans, according to the 2021 TIAA Institute-GFLEC Personal Finance Index report. Only 50% of those surveyed were able to correctly answer questions testing their financial knowledge. Twenty percent of those surveyed showed “an extremely low level of financial literacy,” according to the research.

Which is perhaps why employees are increasingly turning to their employers for greater support in managing their finances. Plenty of organizations have stepped up to the challenge — offering financial solutions like earned wage access, student loan benefits, and emergency savings funds — but additional support and education may still be needed to help workers achieve true financial stability, Lew says.

“The reason most employers want their employees to substantially improve their financial efficiency is because we know that when an employee is financially self-sufficient, productivity goes through the roof,” Lew says. “But it is almost impossible that this problem will be solved by employers alone. We cannot expect employers to invest in education right now, because they are very busy surviving.”

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One option, Lew says, is for employers to partner with a third-party offering or advisory firm that can provide employees with both financial education and help them manage their own money. One-on-one coaching that helps develop a better understanding of financial needs and make better decisions that can result in a financially sound future.

But just 47% of organizations offer access to advisers as a benefit, according to Bank of America’s 2021 Workplace Benefits report. As the war for talent is expected to continue throughout 2022, these expanded offerings may prove to be vital for employee retention.

“This phenomenon is unlike anything we’ve seen before,” Lew says. “Look at the mass resignations, where does it come from? Why are employees doing this? They are doing this because the workplace has become so disconnected from what they really need. Employers can’t forget that the employee is first and foremost a human being, and they can’t look at them as part of the corporate structure anymore.”