FUNDAMENTAL COMPETENCE

Financial management skill an invaluable asset

Youths learn a lot from our education system, but very little about personal finances.

In Summary

• Most young employees enter the workforce already weighed down by student loans on one hand and financial illiteracy on the other.

• Improving financial literacy is like diet or exercise: Step one is paying attention and making it a priority.

Financial management
Financial management
Image: STAR ILLUSTRATED

When it comes to managing our personal finances, most people lack basic financial management skills. We do not talk about money with our friends and family. We feel uncomfortable when people talk about money in front of us, and it is one of those things not taught in schools.

We have been brought up in a society that believes money is a private topic. Yet financial management is a fundamental skill. At particular risk are young adults who get employed or start a business.

This, coupled with a poor saving culture, and we have a generation of employees weighed down by debt. Kenyan youths learn a lot from our education system, but very little about personal finances. As such, the young generation is ‘thrown’ into the world with limited knowledge on how to manage their finances.

Left to their own devices, they tend to do whatever they want with their money, which they do not have in the first place, a situation that sees most of them turn to debt and other menaces such as gambling.

I was recently speaking to a few youths, in their entry-level jobs, in one of my mentorship sessions. Most of them confessed that they do not save.

As a result, they regularly run out of money before the next payday and have to borrow either from their families or friends, or take mobile loans to meet their day-to-day expenses.

Financial illiteracy affects many facets of an individual’s life. In the work environment, financial stressors are not only negatively impacting employees but are costing employers as well. Stressed employees are found to be less productive, take time off work to deal with their finances, and are more likely to cite health issues caused by financial stress. Generally, financial stress leads to productivity losses and increases absenteeism, healthcare claims, or even higher turnover.

This example is a representation of our youth today. Unfortunately, these are the youth who are expected to start their own businesses, become managers and eventually CEOs, raise families, etc.

This is a stark reminder that we have a personal finance crisis amongst the youth— and it is true of the older generations as well. What is straightforward is the reality that financial stress impacts employees regardless of age, gender or salary.

PWC Employee Financial Wellness Survey 2017 reports that nearly one in three employees report that personal finances have been a distraction at work. These employees spend working hours thinking about or dealing with issues related to their personal finances.

Financial illiteracy affects many facets of an individual’s life. In the work environment, financial stressors are not only negatively impacting employees but are costing employers as well.

Stressed employees are found to be less productive, take time off work to deal with their finances, and are more likely to cite health issues caused by financial stress. Generally, financial stress leads to productivity losses and increases absenteeism, healthcare claims, or even higher turnover.

Where do we begin to change this trend?

Well, employee financial wellbeing is a growing concern for businesses but it also presents an opportunity for employers to invest in financial wellness programmes. Basic courses in budgeting and debt reduction in addition to retirement planning would be a great start.

If employees are better at managing their money, perhaps they’ll be better at managing company resources. Perhaps they will carry with them less stress to the workplace, which certainly impacts their ability to perform at the highest level.

Most young employees enter the workforce already weighed down by student loans on one hand and financial illiteracy on the other. Good employers are taking notice of this and are creating an environment to provide employees with a foundation for better money management.

This is not only good for the well-being of the employees but for the bottom-line too. Employers, meanwhile, gain appreciation from their employees by demonstrating a deeper interest in their lives and building an employee-centric culture. Introducing financial management lessons is an employee perk of the future.

However, it does go beyond financial well-being. If employees are better at managing their money, perhaps they’ll be better at managing company resources. Perhaps they will carry with them less stress to the workplace, which certainly impacts their ability to perform at the highest level.

The government has introduced financial literacy in the new curriculum. The aim is to educate children on money management fundamentals and build a culture of responsibility and personal accountability at a tender age.

With the right approach, employees and employers can reap the rewards of being financially fit. Ideally, improving financial literacy is like diet or exercise: Step one is paying attention and making it a priority.

Head of Human Resources, Diamond Trust Bank.

[email protected] @Lillianngala