We’re Suffering From A Gap in Financial Knowledge; It’s Time To Close It

There’s an epidemic ravaging communities across the country, and it’s not only COVID-19. People everywhere now face dire economic circumstances where their lack of financial savings or mounting debt is contributing to a crisis of stress and mental health. Despite all the wage increases we’ve seen in the wake of the War for Talent, more than half of all Americans lack the funds to cover an unexpected $400 emergency, like replacing a blown tire or a trip to the hospital. That means millions of us are a mere hiccup away from sliding down into bankruptcy. How did we get here?

<<3-day Workshop with Valuable Tools and Practical Planning Tips>>

An Unfolding Crisis

Many of the young people entering the workforce these days haven’t been coached in the basics of personal financial knowledge (let alone business knowledge), such as making a budget or understanding how devastating something like debt can be. I’m not sure we’ve made a concentrated effort to teach these kinds of skills for generations. And we’re now paying the price as a society. It can be easy to tune out talk about financial knowledge and money as just about numbers. But it’s not: It’s about people.

When people suffer from crippling debt, it can haunt them for the rest of their life. It impacts every decision they make. It’s like a rock attached to their leg, dragging them underwater. The lack of financial knowledge can also be used as a weapon against them. For example, according to the National Network to End Domestic Abuse, financial abuse is estimated to play a role in 99% of domestic abuse cases. It also diminishes a victim’s ability to stay safe after leaving an abusive partner. At the same time, some people face incredibly hard trade-offs, like putting food on the table for their children or paying a utility bill to keep the heat on during winter. Is it too much to say that the lack of financial knowledge is the root of all evil?

Unfortunately, our current economic state will not make things any easier. We must remember that young people have never experienced high inflation and interest rates, and they are going to get pounded. Even buying a home, which has traditionally been a path to build wealth, is being cut off. Not only do buyers have to contend with rising interest rates, but they are also forced to compete against other buyers making cash offers. Even building a home seems out of reach, given the inflationary costs of lumber, steel, and labor.

The wealth gap that plagues us will only continue to widen between the haves and the have-nots unless we find ways to teach more people how they can get their personal finances under control. The good news is that it can be done. But it’s businesses that need to step up and become the new teachers.

Stepping Up To Help

This isn’t an issue we can wait around for a bailout on. As companies seek to recruit and retain talent, they’re forced to reckon with the fact that their associates are suffering financially. That means they’re not sleeping well, they’re distracted, and they might be forced to make decisions they’ll regret later—like moving to a new job for 50 cents more an hour.

When the purpose of your business is to improve the lives of the people you work with, it’s tough when you know they’re struggling. That’s why we have been working so hard for almost 40 years to teach our employee-owners everything about the business, which also helps them understand their finances at home. Once you understand how a budget works, you see that it’s basically the same at work as it is at home.

To teach this knowledge, we have developed numerous training programs over the years with the help of our associates, several of which could be taken at home. We also worked with outside vendors such as Dave Ramsey to offer courses on topics like building rainy day funds to head off future emergencies as well as understanding compounding interest. We’ve also partnered with a local credit union, Multipli, to offer additional courses, one-on-one counseling, and access to short-term loans at reasonable interest rates our associates can use to offset emergency shortfalls and avoid predatory pay day loans.

Our company also set up an employee emergency assistance fund to help our associates facing financial hardships. We work with our partner, the Community Foundation of the Ozarks, to distribute up to $2,000 to associates coping with catastrophes, natural disasters, emergency travel, and medical and personal hardships. Since 2017, our fund has provided over $350,000 to some 340 employee-owners and their families. If they need help more than once, we also require them to complete a financial education session.

What’s profound to me is how big the assistance number has gotten. That means people are hurting—and we’re Middle America. It’s also telling because the work never ends. Even though we have been teaching financial literacy courses for decades, nearly two-thirds of our workforce has now been with the company for less than five years as we’ve added more people while also seeing more and more of our older associates retire. We must keep teaching, or someone can slip through the cracks.

Consider a case involving one of our associates who wanted to treat his family to some wonderful Christmas presents. Who can’t relate to that? But he was short on cash, so he turned to an online payday lender to borrow $1,000. The lender laid out a payment plan where this associate would pay a minimum of $100 a month. He figured he would pay off the loan in less than a year. What got lost in the fine print was that the loan came with an annual percentage interest rate of 350%. That’s not a typo. While this associate faithfully made his payments for the first few months, he soon realized he hadn’t even begun to pay down the principal of the loan. He might never pay it off. He was facing a crisis. Fortunately, he had someone to turn to for help—his employer.

Closing The Gap

The good news is that thanks to several members of our human relations and accounting teams who serve on our emergency fund’s committee, we were finally able to pay off that payday lender. They stepped in to help. But it wasn’t easy.

When our team called up this lender, the lender couldn’t give them a definitive answer about the payoff amount. They did everything they could to make it as hard as possible to pay it off—especially because the amount owed continued to compound and grow by the minute. It was a ticking time bomb. Our team had to come up with an estimate of the payoff amount based on how long it would take for a registered check to reach the lender in the mail. It’s hard to imagine how anyone can live with themselves knowing the kind of damage they’re inflicting on people’s lives.

But millions of Americans find themselves desperate and vulnerable enough to turn to these predatory lenders. It should be our role as employers and co-workers to step in and offer an alternative, to give people the knowledge, understanding, and help they need to close the financial knowledge gap. The payoff from closing this gap will have an enormously positive impact on so many people’s lives and the decisions they make at home and at work. It may even play a key role in how your organization recruits and retains talent as more and more employees look for employers who are willing to invest in them by giving this kind of knowledge. Eventually, by arming people with financial knowledge and security, we can also begin to close the wealth gap as well. This is one of the best investments we are making as a company. It’s an outcome that benefits us all.

Looking for more on how to incorporate education and training into your business? Join us for our next introductory workshop – Discover the Game.