Tag Archive for 'Financial Literacy'

April is Financial Literacy Month

Published by JLarocque on March 22, 2010 in Financial Education, Financial Tools, Financial Wellness and for Employers. 0 Comments Tags: , , .

Back in 2000, April was declared “Financial Literacy for Youth Month.”  Now, it’s just “Financial Literacy Month.”  Over the course of the last decade, it seems that us grown ups have shown that we really don’t know much more about money than our kids do – and therefore the Senate decided to drop the “youth” bit and include us adults in their call for better financial education.

And so what exactly are the folks in Washington trying to accomplish by dedicating an entire month to financial literacy?  Well, it’s quite simple actually.  See, the government recognizes that a key to restoring confidence in our financial system and maintaining America’s competitive advantage in the world is to provide financial education in our schools and workplaces.  And, while what we do in our schools is critical over the long-term, the best way to impact America’s reality today involves getting employers, or more specifically HR, to rally around the issue and help employees with their money.

Financial Literacy Month

Make the Most of Financial Literacy Month

In fact, those in Washington view the workplace as so critical to solving the financial literacy problem that recommendations have been made to extend tax incentives to employers that provide financial education (we’ll keep you updated on progress there).

You knew your job was tough, but seriously?  In addition to implementing that new talent management system, you have to restore confidence in America’s financial system?  Sounds like a lot of work.  Well, let’s take this one step at a time.  Here are some ideas for dipping your toe in the water and trying some things out come April:

  • Hold a “Creative Savers” contest.  Have employees submit creative ways they personally employ toconsistently live within their means and save for the future. It will be great for those who are struggling in this area to learn practical, everyday financial ideas that are making a positive difference in their co-workers lives.  And likely, while these ideas and practices can be quite creative, they will also tend to be relatively minor spending and/or saving tweaks that can be replicated in most budgets.  Have the 401(k) committee select the top three ideas, award some cool prizes to the winners and let the rest of the workforce benefit from their money magic.
  • Do a survey.  Financial Literacy month is a good time to take the money pulse of employees in your organization.  A well designed survey can help employees assess their financial situation and allow you to get a glimpse of the financial stress in your organization.  If you’re looking for a credible survey, I highly recommend the Personal Financial Wellness Scale which was built based on the research of Dr. E. ThomasGarman.  Uniquely, this scale allows employees (and HR) to compare results against national norms.
  • Do some seminars. Financial literacy month offers a great reason to reach out to your vendors.  You may want to start by calling your 401(k) administrator for retirement and investing related topics.  But don’t stop there.  There are a number of organizations that provide onsite financial workshops.  Some of these organizations are fee only, while others have programs where fees may be waived altogether.  If you are considering a no cost seminar provider, be sure that you understand the goals and objectives of the vendor.
  • Hold a fair.  Nothing like a little free food and drink to get the attention of your workforce.  These days, so many of your employees get the majority of their financial and health products from you.   Invite your vendors and have them come with thoughtful ideas about how to help employees improve their financial health – this may include topics such as saving for retirement, how to cut health care expenses or keys to a rock solid income protection plan.  In addition, make members of your benefits and compensation staff available for one-on-one discussions.

If you implement one or more of these ideas, you may be surprised at what you learn about your employees.  Employee financial distress is pervasive and you may decide that this April cause deserves a year round effort.

Sleeping Financially Well

Published by JS Wolff on April 21, 2009 in Economy and Financial Wellness. 0 Comments Tags: , , .

According to the 2008 American Psychological Association’s Stress in America survey, money is often on the minds of most Americans. In fact, the results revealed that money and the state of the economy are two of the top sources of stress for 80 percent of Americans. And symptomatically, one third of Americans reported losing sleep over the economy and personal finance concerns, according to a recent poll by the National Sleep Foundation.

Know that we have a problem and understanding what to do about it are miles apart… and even further removed can be actually changing our behavior.

Some believe that we should start making better financial citizens before they enter the workforce. Sharon Lechter, a member of the President’s Advisory Council on Financial Literacy is on a mission to see that every student receives some form of financial education. Her goal seems closer with the recent introduction of a Congressional bill that would require every college and university receiving federal funds to provide a four-hour course on financial literacy.

This strategy and may provide much needed money sanity for the next generation and prevent future financial meltdowns, but what about those of us who don’t have time to go back to college? Let’s get real simple…

In last week’s entry we talked about four buckets of money

- Essential, Now (less that 5 years)
- Non Essential, Now
- Essential Future (more than 5 years)
- Non-Essential Future

This week’s post addresses why did I selected five years as the tipping point between now and later. It has to do with the trust level I have for where I park the money and how much chance is there to lose it versus the opportunity for growth.

For example, there is historical evidence that I can’t trust the stock market to park my money for less than a 5 year period. To illustrate, let’s take a quick look at the best and worst stock market periods over 1, 5, 10 and 20 year periods.

Best Worst
1 Year +61% -39%
5 Years +30% -4%
10 Years +18.5% -1%
20 Years +18% +5.5%

Although this data is historical and not necessarily a predictor of future market activity, there is a huge difference between the 1 and 5 year swings. While I’m not willing to take the possibility of a 39% loss for money I need in the near term, the risk of a 4% loss over a 5 year period seems more palatable.

So how does this help me? Concluding that exposure to the stock market will only be for money uses outside of the next five years, I can concentrate on more conservative vehicles for near term needs and wants… and be one of the poll respondents who actually can get a good night’s sleep.

Beyond Financial Literacy

Published by JS Wolff on April 13, 2009 in Economy, Financial Tools and Financial Wellness. 0 Comments Tags: , , .

Turns out April is “Financial Literacy Month” and the National Foundation for Credit Counseling is weighing in by releasing the initial results of their third annual Financial Literacy survey. As this is currently a hot topic nationally, Congress will be briefed with the full report later this month.  They will hear, among other alarming statistics, that fully 41% of respondents gave themselves a grade of either “C, D or F” when it comes to understanding money and/or making good money decisions.  We are definitely not making the Dean’s List here.

So what’s the problem? Evidence suggests that economic and financial stress is damaging health across gender lines but apparently affecting women to an even greater degree. According to 2008 American Psychological Association’s Stress in America survey more women than men (84 percent to 75 percent) expressed fear about the economy, and many reported new physical and emotional symptoms, such as headaches, irritability, insomnia, fatigue, overeating and chest pain.

With this kind of evidence, why aren’t we more proactive in preventing this stress from taking such a toll on our health and wellbeing? We know that the medical side of the health/wellness movement took a dramatic turn as they discovered it was both healthier and less expensive to prevent disease than to treat it after onset. Similarly, ask anyone who has ever tried to dig themselves out of a financial hole, it is always more stressful and expensive to dig out of a money pit that stay out of one in the first place.

I’m convinced that much of the problem can be attributed to a couple of reasons…first, there’s too much financial information for us to process and secondly, the communication of money concepts are often overly complicated.  In the past few weeks, I have been discussing pros and cons having tons of data within clicking distance.  Information, and even education, is only valuable only if we have a simple way to determine its relevance to our personal situation and forge a confident, clear path toward decisive action.

So taking off from last week’s example where we looked breaking down a complex topic like Estate Planning by forming a few simple, high level questions, let’s consider something similar for managing money in tough times.

The big picture money questions in tough times are:

  • Do we need money for an essential expenditure or a non-essential expenditure?
  • Am I going to spend within the next 5 years or beyond the next 5 years?

I will explain the five year timeframe in the next blog, but with these simple questions we can create four buckets of money and form very straightforward action plans for each. The four buckets are…

  • Esssential, Now (less that 5 years)
  • Non Essential, Now
  • Essential Future(more than 5 years)
  • Non-Essential Future

Next week… walking through simple money management strategies for each of these buckets.