What is your financial literacy?
Unless you studied accounting, financial literacy just doesn’t get the same amount of attention in school as other subjects. Whether you are an entrepreneur running your own small business or an individual managing your personal finances, financial literacy can be a giant blind spot in your personal skill set.
Financial literacy – or the ability to understand how money works and use this knowledge and skill to manage financial resources effectively for financial security over the course of a lifetime – goes beyond being able to balance a checkbook or get a job. It also includes skills like understanding compound interest, inflation, taxes, long-term financial planning, such as planning for retirement, and financial discipline, so you can follow your long-term plan and achieve financial goals. As an individual, financial illiteracy can lead to the mismanagement of personal funds, and ultimately is one of the leading causes of stress. As an employer, financial illiteracy among staff members makes employees less effective in the office. But there are ways to financially empower yourself or your employees:
Financial literacy forums
If you are an employer, offer financial classes for your employees to help ensure your staff is free of financial stress at the workplace. Bring in experts to help employees become financially literate and confident. If you are an employee and your employer does not offer finance classes, take advantage of financial forums and seminars happening in your community.
Retirement and 401(k) plans
Most employers offer a pension or 401(k) plan as part of the employee benefit options. These can be a good opportunity for helping employees plan ahead for the future and should be taken advantage of when possible. Many employees, however, aren’t sure how to use or maximize the value of these plans. Offering workshops or webinars about them can help answer any questions that can arise about these plans.
Get educated on the Earned Income Tax Credit. Many people in the workforce don’t realize they could qualify for this federally funded credit. If you are an employer, make sure to educate employees on the Earned Income Tax Credit option. Particularly if you are a lower-income employee, this tax credit can give you the extra income needed to not live paycheck to paycheck and relieve financial stress.
A survey done by the National Foundation for Credit Counseling found that 56 percent of adults did not have a budget for managing their money and 40 percent of adults admitted to not knowing what they are doing when it comes to personal finance. Budgeting is one of the first steps to financial stability, whether that is personal finance or business planning. If you find setting a budget is difficult or you question if you are budgeting correctly, consult a financial planner. It’s never too late to start managing your money better.