Leading Employees to Financial Literacy | Annotated Bibliography

Bannon, S., Ford, K., & Meltzer, L. (2014). Financial literacy programs in the workplace. CPA Journal, 84(9), 67-71. Retrieved from http://wsuproxy.mnpals.net/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=98342933&site=ehost-live.

CPAs have a unique position to aid companies in implementing financial literacy programs for their employees. Financial stress leads to distractions at work. Various programs can be implemented to increase financial wellbeing. CPAs can leverage their expertise to design a program to benefit a company. Other financial service providers could misinform consumers based on trying to sell a product; bad decisions could result (Bannon, Ford, & Meltzer, (2014). Knowledge obtained from a trained CPA would better serve the consumer. Financially savvy employees are then knowledgeable, more productive, and retention is higher (Bannon, Ford, & Meltzer, (2014). Financial literacy topics are generated through surveying the client’s employees. A targeted plan will benefit the most employees. Some companies worry about cost and liability when implementing a financial literacy plan; however, risk is minimized when a trained professional, such as a CPA, offers sound advice. Several companies have created financial wellness plans.  Companies and employees benefit from having a CPA create a knowledgeable financial literacy program. This article highlights the need for a CPA to develop a financial plan for a company. Successful plans are a win-win for all stakeholders involved.

Clark, G. L. (2014) Financial literacy in context: A rejoinder. Economic Geography, 90(1), 29-31. https://doi.org/10.1111/ecge.12031.

Financial literacy has a geographic element. The task of financial literacy is first tied to understanding the elements that represent the project such as the gap in knowledge of individuals and understanding applicable financial principles and concepts (Clark, 2014). The gap in knowledge is different for different areas of the world. Knowledge is also tied to an individuals age, gender, income, and access to resources (Clark, 2014). Research on geographic impact on financial literacy is limited. According to Clark, a geographic understanding of financial literacy is necessary to create any solution (Clark, 2014). Clark further states that the economy and the “position” individual holds in society relates to the outcome of financial literacy (Clark, 2014). The outcome is complicated by behavior also. Many factors affect the study of financial literacy. The article describes the need to address geographic elements when understanding financial literacy. Certain cultures and therefore behavior traits affect what knowledge an individual has in regard to financial literacy.

Clark, R., Morrill, M., & Allen, S. (2012). Effectiveness of employer-provided financial information: Hiring to retiring. The American Economic Review,102(3), 314-318. Retrieved from http://www.jstor.org/stable/23245549.

Financial choices affect lifetime utility of an individual. Financial choices are based on knowledge obtained. Low financial literacy of retirement instruments is highlighted in the article. The most op-tune time to provide financial education is during the start of the employee’s career or during the end (near retirement). Evidence indicates these two times are peak periods to provide the financial education and the employer is the most logical choice to provide this information. Employers are navigating through the challenges to provide workers with the most value about investment programs. Automatic enrollment is one way to provide forced financial saving through an employee sponsored retirement plan during the hiring process. Based on the studies held by Clark, Morrill, & Allen, employers who had automatic enrollment had 90% participation rate (Clark, Morrill, & Allen, 2012). During the period near retirement financial education increased literacy for those individuals per the study.  The article describes the two most important times individual needs to explore to increase financial literacy.  Employees have an opportunity to highlight this time and provide the education.

Employers the key to helping workers save more. (2015). Journal of Financial Planning, 28(10), 11. Retrieved from http://wsuproxy.mnpals.net/login?url=http://search.ebscohose.com/login.aspx?direct=true&db=buh&AN=110188062&site=ehost-live.

Most Americans surveyed who participate in an employer sponsored retirement plan wish the employer would have offered more financial advice or encouraged savings at an early age. Since many Americans are on their own for retirement planning, many do not have enough money, or some do not have any retirement funds at all. Retirement planning is sometimes difficult and hard to understand. Employers are trying to reverse the trend by offering some type of financial literacy program. Employers are realizing traditional retirement planning is not sufficient. A comprehensive financial literacy program is needed and should be tailored to individual’s needs (Employers the key to helping workers save more, 2015). This article clearly outlines the need for more than a retirement planning session for employees. Most employees are not saving enough for retirement period. Employees need some time of motivation to save. Basic facts and figures are not enough to support the need to invest in a retirement plan.

George, A. & Kane, M. (2016). Financial stress: The impact on individuals, employees, and employers. Journal of Pension Benefits: Issues in Administration, 24(1), 35-38. Retrieved from http://wsuproxy.mnpals.net/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=118129961&site=ehost-live.

Employee stress relating to financial obligations impacts many working Americans. The impact is on a physical and mental level to the employee and on an economic impact to the employer. Illness related to financial stress is the number one cause (George & Kane, 2016). Symptoms related to financial stress can be headaches or high blood pressure or as severe as a heart attack. The stress is then carried over to job performance. Most human resource professionals, 70 percent, agree stress impacts overall job performance (George & Kane, 2016). This correlates to the economic impact employer’s face which is approximately $5,000 per year per employee (George & Kane, 2016). Further effects are on employee retirement status. Retirement could be delayed or even not taken based on financial requirements. An aging workforce causes higher group rates. Costs to the company continue to rise as employees deal with financial stress. The employer responds with providing a financial literacy piece, but how? Financial education is an individualized set of conditions. Addressing these set of conditions is hard, but employers are recognizing the need and importance of such programs. This article addresses the impact of financial stress from three stakeholder perspectives. Future development of the ‘how to’ piece is something yet to be developed.

MacKenzie, K. (2017). A case for incorporating financial wellness into your retirement planning practice. Journal of Financial Service Professionals, 71(3), 49-52. Retrieved from http://wsuproxy.mnpals.net/login?url=http://search.ebscohose.com/login/aspx?direct=true&db=buh&AN=122751707&site=ehost-live.

Most Americans aim for a retirement period with adequate funds; however, the true picture is many Americans fall significantly short of what is needed. The gap is being noted by employees, employers, and public policy. The financial industry has come up with several options to offer employees help with saving, such as auto enrollment, target benefit funds, and increasing plan contributions (MacKenzie, 2017). These options add value; yet more financial education is needed for American workers. The challenge is most people find financial planning overwhelming which tends to disengage the individual all together (MacKenzie, 2017). The solution then lies in a holistic approach which focuses on basic financial behaviors and money management (MacKenzie, 2017). Employers have found the traditional approach of wellness extends beyond health and includes a financial component. The bottom line is employees who have a strong health and financial wellness are less costly to the employer. Employers now see the value in providing a financial service to the employees. Various incentives are being offered to employees for hitting certain goals. The issue in question though, is measuring the effectiveness of the program. Overall, the data needs to prove the financial education is making a direct impact to the employer.  The article highlights the need to measure financial education.  The idea to measure is difficult as financial goals are different for every individual.

Plump, C. M., & Jr. Ketchen, D. J. (2016) New legal pitfalls surrounding wellness programs and their implications for financial risk. Business Horizons, 59(3), 267-272. https://doi.org/10.1016/j.bushor.2016.02.002.

Employer wellness programs have several laws they need to follow. A few recent lawsuits describe the need of employers to design their wellness program with employment and anti-discrimination laws in mind. The Equal Employment Opportunity Commission (EEOC) issued a notice of proposed rulemaking (NPRM) in 2015 which offers some general guidance as it relates to compliance with wellness programs (Plump & Ketchen, 2016). The notice identified three topics: the plan must explain what a wellness program is; the plan must state the employee participation is voluntary; and the plan must keep medical information of the employee confidential. Employee wellness programs, like other benefits, need adjustments over time. Clear and simple communication between the employer and employee will facilitate the best approach for the future. Staying abreast of changing employment laws will also help. If all laws are not followed, then, the company faces costly consequences. The article addresses the need to stay current with employment laws. Privacy and disability are two areas of the law which wellness programs can not afford to dismiss.

Van Busum, K., & Mattke, S. (2013). Financial incentives: Only one piece of the workplace wellness puzzle. International Journal of Health Policy & Management 1(4), 311-312. Retrieved from http://wsuproxy.mnpals.net/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=98423176&site=ehost-live.

Various strategies exist to encourage participation in an employee wellness program. Incentives such as reduced health premiums or discounts on health programs along with positive reinforcement are two ways to promote wellness. Each company should carefully consider which incentives would work for their employee population. Clear communication creates awareness of wellness programs and a culture that the employer has set (Van Busum & Mattke, 2013). Participation at various levels in the company can be created by different incentives. Financial incentives can be tailored to a behavior or outcome. For example, a behavior could be getting all employees to exercise four days a week. An outcome could be the overall health of the company could be reduced by decreasing a risk factor to the insurance company. Incentives are at the discretion of the company; however, legal considerations are still important. Overall, a variety of incentives can be utilized to increase participation and engagement (Van Busum & Mattke, 2013). This article talks about the variety of incentives companies can utilize. A company needs to the goal of the wellness program along with the employees. 

Verne, J. (2014). Financial wellness programs to reduce employee stress. Compensation & Benefits Review, 46(5–6), 304–308. https://doi.org/10.1177/0886368714566150.

Financial decisions are part of every aspect of life. Money choices directly correlate to stress (Verne, 2014). Many Americans are faced with increased debt and lack the financial knowledge to rise above it. According to Verne, consumers owe $11.52 trillion for debt obligations and 33% of American adults are delinquent on debt payments (Verne, 2014). Companies now understand the connection between financial education and the stress money plays on employees. Happier and healthier employees are more productive and cost less (Verne, 2014). The key piece is financial literacy. Employers play a part in financial literacy as they provide the income to employees.  Employers need to provide a livable wage (Verne, 2014). Next, employers could provide employee education of financial matters through a benefit program. Educating employees to make smart financial decisions assists all parties involved. The employee gains knowledge and financial strength. The employer receives more productivity out of the employee. Employers can aide in creating savings plans for their employees. All these components play a part in promoting a financial wellness plan.  Financial wellness plans pay off big for companies as a way to increase productivity and reduce stress (Verne, 2014). This article articulates the need for financial wellness plans as a cost saving measure for companies.  American debt is rising while knowledge is at a subpar level which creates an opportunity for employers to positively affect financial change for their employees. 

Willis, L. (2011). The financial education fallacy. The American Economic Review,101(3), 429-434. Retrieved from http://www.jstor.org/stable/29783784.

Currently, a clear connection between financial education and financial success has not been documented; however, researchers hope at some point financial education is effective (Willis, 2011). Financial education is hard to measure because it takes time, money, and involves personal information. The personal feelings, behaviors, and values associated with financial education are hard to quantify. Most individuals lack the understand of math to calculate compounding interest (Willis, 2011). Financial decisions are complex. Options are plentiful these days on what type of mortgage to choose or what type of 401k to invest in. The financial marketplace continues to evolve every year as product offerings change at a rapid pace. Education would need to occur throughout all stages of life. Many individuals lack the interest or desire to constantly learn new financial information. How does an individual know the education would lead the person to the correct decision? Are financial education consultants honest and ethical? All factors would need to be addressed in the financial education plan which would be very costly and time consuming. This article highlights the high cost associated with financial education and the personal feelings associated with financial success which are hard to measure. Financial education is not a one-time action, it is a constant, individualized, evolving process.

Topic: Financial literacy in general

Behrman, J., Mitchell, O., Soo, C., & Bravo, D. (2012). How financial literacy affects household wealth accumulation. The American Economic Review,102(3), 300-304. Retrieved from http://www.jstor.org/stable/23245546.

Wealth is an accumulation of the earnings received over an individual’s working life (Behrman, Mitchell, Soo, & Bravo, 2012). The income needed to sustain an individual during retirement is unknown as many individuals fail to estimate the actual amount; however, the shortfall during the retirement period is felt by many people (Behrman, Mitchell, Soo, & Bravo, 2012). Behrman, Mitchell, Soo, & Bravo examine the connection between literacy and wealth accumulation and find a positive link between the two. When individuals are more literate, they tend to contribute to a variety of financial products including retirement accounts. The funding of retirement accounts suggests an increased likelihood of wealth accumulation (Behrman, Mitchell, Soo, & Bravo, 2012). In the end, the more financially literate the population becomes, the more likely wealth accumulation is created. This article makes a clear connection between financial literacy and wealth accumulation. It however does not address the cost of financial literacy or how to implement a program.

Fonseca, R., Mullen, K. J., Zamarro, G., & Zissimopoulos, J. (2012). What explains the gender gap in financial literacy? The role of household decision making. Journal of Consumer Affairs, 46(1), 90-106. https://doi.org/10.1111/j.1745-6606.2011.01221.x.

This article continues the research stating financial decisions are an individual responsibility and the complexity of financial products is growing. Market movements reflect a greater comprehension of financial products is needed. Differences in gender are analyzed in relation to financial literacy. Research points to the fact that different levels of financial literacy exist among men and women (Fonseca, Mullen, Zamarro, & Zissimopoulos, 2012). Understanding the different levels leads to a greater understanding of why and encourages programs aimed at diminishing the gap. The study concludes the gender gap is not a reflection of generalized male or female characteristics but rather the product of how financial literacy is displayed (Fonseca, Mullen, Zamarro, & Zissimopoulos, 2012). Men and women process information differently. Another conclusion is the education leveled achieved by the individual affects financial literacy (Fonseca, Mullen, Zamarro, & Zissimopoulos, 2012). The glaring take away from this article is the importance of how the financial information is shared with individuals correlates to financial literacy.

Guest, R. & Brimble, M. (2018). Financial literacy 101. Policy, 34(1), 3-7. Retrieved from http://wsuproxy.mnpals.net/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=130164691&site=ehost-live.

Other countries besides the US struggle with financial literacy. In Australia, household liabilities are greater than income according to the Australian Bureau of Statistics (Guest & Brimble, 2018). One disturbing point is borrowers are not understanding interest-only mortgages and the fact an interest-only mortgage is not making any payments to the principal (Guest & Brimble, 2018). Financial literacy continues to be a worrisome trend. Financial literacy is not just financial knowledge but also effective financial decisions (Guest & Brimble, 2018). The Australian Securities and Investments Commission (ASIC) has even inferred that financial literacy should be changed to financial capability to encompass attitudes and behaviors (Guest & Brimble, 2018). Financial literacy has an education component. For all purposes, Guest & Brimble suggest financial education needs to occur at all stages of life and provide a variety of financial information. The reward for having financially literate individuals is great compared to the alternative. The article clearly states the need for financial literacy and in another country. The economic impact for having a financially literate population is great.

Kezar, A., & Yang, H. (2010). The importance of financial literacy. About Campus, 14(6), 15-21. https://doi.org/10.1002/abc.20004.

Kezar & Yang maintain colleges should offer more financial literacy education (Kezar & Yang, 2010). Furthermore, financial literacy is a necessary skill in life and any degree holding individual should have a basic understanding (Kezar & Yang, 2010). Financial literacy has a great impact on the skills individuals need for the rest of life. Based on an evaluation of various college campuses, Kezar & Young found some campuses offer financial education in different forms (Kezar & Young, 2010). Financial education was offered to low-income students, as part of a freshmen orientation course, as outreach from the financial aid office, or other money management workshops. In the end, should colleges be responsible for providing financial literacy to students? What role should educator’s plan in the process? The article strongly advocates for college campuses to provide a financial literacy component. The authors believe it is a life skill all students should contain.

Lusardi, A. (2012). Financial literacy and financial decision-making in older adults. Generations, 36(2), 25-32. Retrieved from http://wsuproxy.mnpals.net/login?url=https://search.proquest.com/docview/1027217017?accountid=15069.

Over the years retirement income has shifted from social security benefits and employer-sponsored defined benefit pension plans to defined contribution plans and Individual Retirement Accounts to 401(k) plans and individual investment accounts (Lusardi, 2012). The complex financial products are up to the individual. Lusardi found financial literacy in older adults to be low (Lusardi, 2012). Financial products carry market risk. The knowledge required to understand market risk is increasing. Therefore, as individuals age, financial literacy decreases (Lusardi, 2012). The study also found evidence of financial literacy being low in many other countries (Lusardi, 2012). Gender differences are present in financial literacy and in other countries (Lusardi, 2012). Women have less financial literacy then men and specifically, older women (Lusardi, 2012). Bankruptcy among the elderly is growing (Lusardi, 2012). Scams continue to target the aging population. The article furthers the concern about financial literacy and specifically women. Since women typically live longer than men, what women will do to increase financial literacy?

Lusardi, A., & Mitchell, O. (2008). Planning and financial literacy: How do women fare? The American Economic Review,98(2), 413-417. Retrieved from http://www.jstor.org/stable/29730057.

The concern is still present among women who face years of retirement with low levels of wealth and few assets (Lusardi & Mitchell, 2008). Research continues to be limited on why individuals in general fail to make a retirement plan. The consequences for not planning are huge and include loss of wealth and few options for retirement living. Lusardi & Mitchell examine older women and their level of financial literacy. Furthermore, women who do plan are more likely to have a higher level of financial literacy (Lusardi & Mitchell, 2008). A generic financial program tends to not address all sides of the financial realm for women. Individual preferences such as saving needs or housing costs along with financial knowledge need to be geared towards women (Lusardi & Mitchell, 2008). Lusardi & Mitchell found financial literacy causes planning, not the other way around (Lusardi & Mitchell, 2008). This article highlights the need to provide financial literacy to women. Women tend to live a longer life than men and thus, women need to plan for this retirement period. Financially literate women tend to be planners and have a retirement plan.

Murendo, C., & Mutsonziwa, K. (2017). Financial literacy and savings decisions by adult financial consumers in Zimbabwe. International Journal of Consumer Studies, 41(1), 95-103. https://doi.org/10.1111/ijcs.12318.

The number of financial products and services offered each year is increasing (Murendo & Mutsonziwa, 2017). The responsibility of managing financial decisions is shifted to the consumer and is complex in many situations. Financial literacy is a topic which focuses on education and decision making to make a financial plan. It directly relates to individual behaviors and the relationship an individual has with debt, investments, and saving (Murendo & Mutsonziwa, 2017). Murendo and Mutsonziwa surveyed 4000 Zimbabwe adults to report on the effect of financial literacy on an individual’s saving outcome (Murendo & Mutsonziwa, 2017). The authors found men have a higher level of financial literacy and geographically urban consumers exhibit more financial literacy (Murendo & Mutsonziwa, 2017). They conclude the disadvantaged populations and areas should increase programs of financial literacy targeted at these populations. In addition, the regression analysis indicates a connection between financial literacy and savings. The article highlights the connection between financial literacy and savings based on a large survey conducted in a foreign country. The research proves financial literacy is important, but how should financial education be presented and who should do it?

Riitsalu, L. & Põder, K. (2016). A glimpse of the complexity of factors that influence financial literacy. International Journal of Consumer Studies, 40(6), 722-731. https://doi.org/10.1111/ijcs.12291.

Financial literacy is a skill needed at all stages of life regardless of education or occupation (Riitsalu & Poder, 2016). Society in general and community life reflect the financial literacy of the people who reside in the community (Riitsalu & Poder, 2016). Research is based on two points of view: one is the connection between financial literacy and behaviors, and the other is financial literacy creates behavior outcomes (Riitslu & Poder, 2016). The article favors the first approach. The research pointed to a few thoughts. First, a home filled with books yielded higher financial literacy (Riitsalu & Poder, 2016). Second, the financial literacy score was positively affected by experiences held such as owning a debit card (Riitslu & Poder, 2016). The third conclusion was student test scores along with gender and the school language affected financial literacy (Riitsalu & Poder, 2016). The article addresses some of the connections between behaviors and financial literacy; however more research needs to be completed on other behavior factors.  It is difficult to quantify the various behavior aspects of financial literacy.

Sabbaghi, O.,

Sabbaghi, O., Cavanagh S. J., G., & Hipskind S. J., T. (2013). Service-Learning and Leadership: Evidence from Teaching Financial Literacy. Journal of Business Ethics, 118(1), 127–137. https://doi.org/10.1007/s10551-012-1545-6

Tannahill, B. A. (2012). The role of financial literacy in retirement decision making. Journal of Financial Service Professionals, 66(2), 32-35. Retrieved from http://wsuproxy.mnpals.net/login?url=http://search.ebschohost.com/login.aspx?direct=true&db=buh&AN=72323435&site=ehost-live.

Retirement planning is difficult due to the number of decisions that must be made, changes in options offered, and constant reevaluation of the plan (Tannahill, 2012). What complicates it further is financial literacy changes as an individual’s age increases (Tannahill, 2012). Individual confidence in financial decision making tends to increase as a person ages up to age 60 when at that point financial literacy declines (Tannahill, 2012). The financial advisor needs to be mindful of this and adjust the retirement planning process to accommodate the varied level of confidence of the client. Financial advisors also follow the pattern of individuals and likewise understand financial literacy changes over time. All retirement planning process’ need to be monitored and adjusted over time. Changes are occurring all the time and especially for retirement. The article highlights the level of financial literacy over an individual’s life. Confidence grows as a person ages. The retirement decision making process evolves over time with many decisions being made throughout.

Reflection paragraph:

The first ten articles are about financial literacy as a wellness benefit. The next ten articles are general financial literacy with a few found on gender differences and generational differences. Both have guided my thought process into financial literacy and more specifically women. At one point I had a moment were the research told me that financial literacy is about how the material is presented. I believe the literature has given me a point for departure. I need to keep reading and narrow down my focus. I would like to read more about women in a rural setting and in the 21^st century. Many questions come to mind at this point: why do women not participate in financial decisions; do banks offer financial literacy programs based on gender; or can rural women increase their financial literacy? The literature has consistently pointed to the fact that financial decisions are complex; most employees are stressed when dealing with financial matters; and financial plans are individualized for the most part. I feel I am well on my way to a capstone topic I will enjoy and hopefully will produce a good paper.