Young adults are struggling with basic financial concepts, leaving them feeling overwhelmed trying to make the right decisions. This affects employers through costs associated with lost productivity, turnover, and recruitment. According to the 2024 Wellness Barometer Survey by BrightPlan, “employees report losing an average of 7.3 hours of productivity each week due to financial stress, costing employers approximately $183 billion annually.” The survey also found 78% of leaders say employee financial stress led to higher turnover.

In a recent International Foundation webcast, “Financial Literacy That Actually Improves Benefits Outcomes,” Darla Bishop, Dr.P.H., Financial Wellness Strategist at Finansis LLC, discussed how financial literacy connects to employees’ interpretation of their benefits, a practical framework for financial literacy, and ways to improve benefits utilization.

Financial Literacy and its Connection to Benefits

Bishop defines financial literacy as “the ability to make informed, confident decisions about money.” In the benefits environment, this means understanding available options, knowing when a benefit applies, and feeling confident taking action.

Benefits are a form of compensation that requires employees to make financial decisions, but many young adults struggle to use their benefits because time pressure, financial stress, decision fatigue, competing priorities, and lack of confidence or experience with how choices impact take-home pay make the process overwhelming.

Financial and benefits literacy is successful when employees have clear, low-risk next steps, giving them the confidence to ask questions.

Three Currencies Framework for Financial Literacy

In the webcast, Bishop describes a three-part currencies framework consisting of time, energy, and money, which employees need to balance to make decisions. Knowledge of the framework helps benefits professionals understand the mindset of employees’ benefits decision-making process. When the three parts of this framework are not present, employees become stressed and are unable to make informed, confident decisions.

Time

When an employee is short on time, benefits decisions may be rushed or postponed. Bishop provides examples of benefits decisions showing up at the wrong time (e.g., when the school year starts, busy time of year for the team). This leaves the employee with less time for benefits enrollment and decision-making.

Energy

An employee’s energy also influences benefits’ decisions. When decisions are too complex (e.g., too many options, unfamiliar language, high mental effort required), this leads to the employee avoiding making benefits decisions.

Money

When employees are not sure about the cost of benefits or worry about the importance of the decision, they may be afraid of choosing incorrectly and fear that they cannot financially afford to make a wrong decision, leading to inaction on benefits decisions.

As you plan benefits communication, keep in mind the stress and uncertainty employees are facing. Ask yourself whether their time, energy and money are balanced. As you keep employees’ perspective in mind, try the solutions below.

Solutions and Opportunities

Bishop provides three solutions for employers to improve financial and benefits literacy:

• Offer financial education sessions on topics that are applicable to all employees (e.g., budgeting, debt, household planning).
• Normalize the conversation around financial education (e.g., add financial wellness to team culture newsletters).
• Highlight existing underutilized benefits (e.g., add “did you know” or “success stories” on benefits, such as FSAs and HSAs, to employee communications).

Other opportunities Bishop suggests to increase employee engagement and understanding of benefits include:

• Adjusting the timing of benefits education, so it is not just at benefits enrollment time (i.e., more frequently, at a different time of year).
• Simplify messaging (i.e., make it easy for a busy person to get the message, internalize, and move on).
• Highlight key benefits (i.e., spotlight benefits during all staff meetings).

Remember – better communication creates better employee decisions and better outcomes for both the employee and the organization.

For additional information on providing financial education, see our Financial Education/Retirement Security (U.S.) Toolkit or our Financial Education/Retirement Security (Canada) Toolkit.

Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.