When it comes to managing our personal finances, most people lack basic financial management skills. We don’t talk about money with friends and family. We feel uncomfortable when people talk about money in front of us. It’s 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 businesses. This, coupled with a poor saving culture, and we have a generation of employees weighed down by debt. Unfortunately, Kenyan youths learn a lot from our education system, but very little about personal finance. As such, they are ‘thrown’ into the world with limited knowledge on how to manage their finances.
Left to their devices, youth tend to do whatever they want with their money, which they don’t have in the first place, a situation that sees most of them turn to debt and other menaces like gambling.
I was recently speaking to a few young people, in their entry-level jobs, in one of my mentorship sessions. Most of them confessed that they don’t save. As a result, they regularly run out of money before the subsequent payday and have to borrow from their families or friends or take out mobile loans for their day-to-day expenses.
This is a representation of our youth today. Sadly, these are the people who, to start their businesses, become managers and eventually CEOs, raising families and so on.
This is a stark reminder that we have a personal finance crisis among the youth — and it is true of the older generations as well. What is straightforward is the reality that financial stress affects employees regardless of age, gender or salary scale.
In the “PwC Employee Financial Wellness Survey 2017”, nearly one in three employees cited personal finances as a distraction at work. They spend working hours thinking about or dealing with related issues.
Financial illiteracy affects many facets of life. In work environments, financial stressors not only negatively affect employees, but cost employers. Stressed employees are less productive, take time off from work to deal with their finances and are more likely to suffer health issues. Financial stress leads to productivity losses and increases absenteeism, healthcare claims or even higher turnover.
Employee financial well-being is a growing concern for businesses but also presents an opportunity for employers to invest in financial wellness programmes. Basic courses in budgeting and debt reduction, in addition to the retirement planning, would be a great start.
Today, most young employees enter the workforce already weighed down by high amounts of student loans on one hand and financial illiteracy on the other. Good employers are taking notice of this and 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 good 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.
But it goes beyond financial well-being. If employees are better at managing their money, they could be better at managing company resources. Perhaps they will carry with them less stress to the workplace, which certainly has an impact on their ability to perform at the highest level.
Financial literacy has been introduced in the new curriculum. The aim is to educate children on money management fundamentals and build a culture of responsibility and personal accountability.
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 prioritising it.
Ms Ngala is the head of human resources at Diamond Trust Bank. [email protected] @Lillianngala