Financial literacy: what does good look like?
Why should employers care?
Unless you’re selling snake oil, living in a society with high financial literacy is a win-win. Employees who understand how to manage their money are less likely to experience financial stress, which is a leading cause of reduced productivity and absenteeism. In fact, a recent PwC Employee Wellness survey found that one in three full-time employees reported that money worries negatively affected their productivity at work. In the same survey, 57% of employees identified financial matters as the most stressful factor in their lives
Financially literate people are more likely to plan their financial future well, pass on good practices to those around them, and avoid money difficulties.
Whether it’s a financially savvy friend, or someone who has spent years recovering from a financial setback, most of us have observed good and bad financial decision-making at close quarters.
For employers, this means lost productivity, lower engagement, and potential HR challenges. The good news? There are simple steps businesses can take to support their teams-and it doesn’t have to cost the earth.
What does good look like?
Like literacy itself, financial literacy is not about making everyone an investment expert. It’s about getting the basics right and growing confidence to make good financial decisions across society.
It includes, for example, understanding the difference between compound and simple interest, calculating interest on a loan, and grasping the idea at €100 today is worth more than €100 in three years’ time due to the time value of money.
Other needs include understanding the fact that risk and return are connected in finance, and the idea of risk diversification. There’s a new strand in digital financial literacy, such as avoiding scams and keeping passwords secure.
Is your head spinning already? In fact, Ireland compares surprisingly well with other developed countries. Recent work by the OECD found that 57% adults in Ireland met the minimum target for financial literacy as the chart below indicates. We were second only to Germany in the EU.
But you don’t need a degree in maths to realise this means 43% of people here failed to meet the target literacy level.
So there is plenty of room for improvement. To that end, Ireland’s National Financial Literacy Strategy 2025-2029 was launched last month.
Will the national strategy help?
The strategy is initially focused on helping groups with lower levels of financial literacy, including low-income workers and the unemployed, those with lower levels of education, and older people. That’s as it should be – but there is also a need to upskill across society.
In reality, financial literacy is a national effort, and employers can play a part, benefitting from a more resilient workforce in the process.
Here are three steps pro-active employers take:
1. Drive pension engagement For most employees, their pension is their biggest financial asset outside of their home. With the launch of auto-enrolment later this year, your staff are going to be asking a lot of questions anyway. So get on the front foot when it comes to pension engagement.
Employers who proactively support pension engagement can help employees make informed decisions—and reduce the HR burden when auto-enrolment kicks in. Consider:
- Hosting pension clinics with your company’s pension advisor.
- Making financial education part of onboarding process for new hires.
- Arranging personal finance presentations for your employees that enable them to improve their financial wellbeing.
- Encouraging Additional Voluntary Contributions (AVCs) by explaining the tax advantages.
If you company pension advisor is not engaging, consider switching to one that who has the processes in place.
2. Being there when needed
Financial literacy isn’t about theory : it’s a real-world skill that is needed at the right time. For example, the time you really need to know about life assurance might be when you’re starting a family rather than during your first week at work. Conversely the optimum time to start your pension is the day you start working. As banks close branches, reduce their advice offering, and generally become a lesser presence in our lives, employers have a role to play.
Employers are often surprised how they can develop a strong employee benefits and wellness proposition. Building on a pension, wider benefits, such as death-in-service cover, counselling, or online GP access can be added on at surprisingly low cost.
Ireland is unusual in having hundreds of financial brokers: there’s one in nearly every town so advice is very easy to obtain. At little or cost to themselves, most employers can offer financial wellbeing and coaching through a financial advisor. That way, when your team experiences life events that effect their finances, help is at hand.
3. Digital financial literacy
Financial management is increasingly done online. That presents the need for a new set of skills. From the need to identify high-risk speculative investments, to avoiding the risk of fraud, these are vital skills for your business as well as for your staff.
The theft of $25 million from UK engineering company Arup through a deepfake scam last year is an indication of the rising need for a high level of digital financial literacy in workplaces. Fraudsters digitally cloned the voices and images of senior management, who instructed the transfer of the money on a video call.
Arup’s case is an outlier, but most businesses will benefit from heightening staff awareness of digital financial literacy from the basics of password security to risks of fraud and impersonation.
From pension engagement to access to advice and digital skills, employers can take simple steps to improve financial literacy in their workforce, building business resilience and employee wellbeing in the process.
Feargal McKenna
Head of Corporate
