April is recognized as Financial Literacy Month in the United States, and it's the perfect time to focus on improving your understanding of personal finance. While financial literacy is an important skill to have, many people find themselves overwhelmed by complex financial situations.
Complex financial situations can lead to stress, anxiety, and confusion. But there are easy ways to simplify your finances to reduce the amount of time and mental energy spent managing your money, which in turn reduces stress levels and limits confusion.
In this blog, we'll explore the meaning of financial literacy, discuss ways you can help your clients and employees simplify their finances and explain why simplicity is essential for achieving financial stability and success.
What is Financial Literacy?
Did you know, according to a 2022 American Psychological Association (APA) study, personal finances rank the highest among sources of anxiety for adults in the U.S.?
While it may not be possible to completely eliminate all financial stress, it is possible to expand your education and develop a deeper understanding of financial literacy.
According to Investopedia, financial literacy is the “ability to understand and make use of a variety of financial skills.” This involves making informed and effective decisions with money and is a skill that can benefit everyone regardless of age, income or background.
Financial literacy encompasses a broad range of financial topics, including budgeting, saving, investing, debt management and financial planning. People with good financial literacy skills are better able to understand the implications of financial choices and plan for their future financial goals.
For example, someone who has good financial literacy may be able to budget well, save for emergencies and avoid racking up debt. They understand the costs associated with budgeting and can set achievable savings goals and smart investment decisions.
But often, a key component to healthy financial literacy is simplicity. Simplifying finances can help ensure your clients and employees have what they need when they need it without any frustration or confusion.
How to Maintain Simplicity in Complex Financial Situations with Planning Tips
While financial literacy is a powerful tool to have, practicing it doesn’t mean you won’t encounter a few bumps along the road.
If you find yourself in a particularly complex financial situation, or if you want to set up a plan to limit future financial complexity, here are a few money management tips you can share with your employees to help add simplicity to their finances:
- Establish a Realistic Budget (and stick to it)
A financially literate individual understands the importance of budgeting and can create a budget that accurately reflects their income and expenses. They know how to prioritize their spending, track their expenses, and make adjustments when necessary to ensure that they are living within their means.
Consider offering your employees access to user-friendly budgeting tools or software that can help them walk through the budgeting process. You can also host seminars or lunch-and-learns periodically that give employees financial tips on how to use their consumer benefits to their advantage.
- Consolidate Bank Accounts
A lot of frustration in finances can come from trying to manage all of your accounts in several places. Between juggling unique login credentials for each and trying to set goals across multiple financial instructions, it can be very stressful.
Encourage employees to simplify their finances by consolidating multiple bank accounts into one or two accounts. This reduces the number of accounts to manage, making it easier to keep track of transactions and reduces the likelihood of overdrafts or missed payments. Consolidating accounts makes it easier to choose the right type of account(s) that meet their needs, such as a checking account for daily transactions and a high-yield savings account for long-term savings goals.
- Utilize your Employee Benefits for Savings and Investing
A hidden gem many employees may be under-utilizing is their benefits package. Modern benefit offerings include Health Savings Accounts (HSA) that go above and beyond the traditionally covered healthcare expenses.
For example, consider offering your employees an HSA with a high-yield savings account. That way, they can save for everyday healthcare purchases while building a nest egg for the future. Additionally, an HSA with unique investment opportunities can help employees transform their savings into something even greater–expanding their financial literacy in the process! Not to mention, with HSAs like Clarity’s, employees can manage their HSA and investments in one convenient platform to further limit the need for multiple logins.
Why Simplicity in Financial Planning is Important
Maintaining simplicity in finances is crucial for achieving financial stability and success. When simplicity is prioritized in finances, it’s a win-win for both you and your employees.
For example, offering benefits like Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) offer tax savings for both employers and employees, helping cut down not only administrative costs but financial complexity experienced by employees.
Financial stress can have a negative impact on employee morale in the workplace. By promoting financial literacy and simplifying employees' finances, employers can help reduce stress levels, improve job satisfaction, and increase employee retention.
Additionally, offering financial education and resources can help employees feel more confident in their financial decisions and improve their overall financial well-being by knowing they are well taken care of by their employer.
Join us for our National Simplicity Day Celebration
Speaking of simplicity… have you heard about our National Simplicity Day Celebration? At Clarity Benefit Solutions, simplicity in finances is something we are always passionate about. It’s the driving force behind our innovative benefit solutions and the reason we strive to provide you with best-in-class service that limits the frustration that comes along with the benefits process.
Build Financial Confidence with Clarity
Financial literacy is essential for making smart decisions about saving and achieving long-term stability and success. By improving your financial literacy through simplicity, you can simplify your finances, reduce stress, and make informed decisions about your money.
Want to transform your employee benefits package with enhanced HSA features? Contact us to learn more about how you can get the most out of your benefits and be a simplicity champion for you and your employees!