Why Financial Literacy Matters More Than Ever
Financial literacy isn’t a luxury—it’s an essential. It gives people the tools to make smart decisions, build independence, and move toward the goals that matter most to them. As the saying goes, without knowing, there can be no doing.
Yet, only about half of US adults are considered financially literate, and that number is even lower among younger generations—just 37% of Gen Z demonstrate basic financial literacy. The cost of this knowledge gap is real: in 2023 alone, financial illiteracy cost Americans an estimated $388 billion.
In employee-owned companies, financial literacy is even more powerful. Understanding how the business creates value—and how individual actions impact the bottom line—helps employee-owners make smarter decisions, strengthen their ownership mindset, and directly influence long-term success. Financially literate employee-owners are better equipped to engage with company performance, share in the rewards, and take real ownership of their futures.
Let’s break down the reasons why financial literacy is a must in today’s world.
Everyday Choices
From managing bills to avoiding debt traps, financial literacy helps people make smarter day-to-day choices. Knowing how credit works or how to budget effectively can prevent costly mistakes.
Long-Term Planning
Planning for retirement, investing wisely, or saving for a big goal all require a strong financial foundation. Understanding risk and returns and setting realistic financial goals makes a huge difference over time.
Managing Debt
With loans, credit cards, and mortgages so common, it’s easy to get overwhelmed. Financial literacy helps people borrow smart, manage payments, and reduce debt faster.
Supporting Entrepreneurs
Good ideas require more than passion—they require sound financial planning. Entrepreneurs with financial know-how are better equipped to manage cash flow, seek funding, and sustain their businesses.
A Stronger Economy
When people understand how to manage their money, the entire economy benefits. Informed individuals are more resilient during downturns and more likely to contribute to long-term growth.
Empowerment and Independence
Financial knowledge means freedom—freedom to negotiate a raise, plan for a major life event, or simply feel confident in managing your money without relying on others. Right now, just 52% of women in the US are financially literate compared to 62% of men—closing this gap is a key step toward equity and empowerment.
Promoting Equality
Access to financial education helps close wealth gaps and lift up underserved communities. It’s a powerful tool for social inclusion and long-term economic mobility.
Practical Tips from the Field
At our April HR Peer Network meeting, employee-owned HR professionals shared great tips for making financial education more accessible and impactful in the workplace.
- Lean on your professional partners: Local banks, retirement advisors, your CFO, and ESOP committees can all support financial literacy efforts. Tap into their expertise.
- Meet people where they are: Focus on what matters most to employees, whether that’s paying off debt, saving for a home, or planning for retirement.
- Normalize the conversation: Money can be a sensitive topic. Offer one-on-one sessions in a low-pressure setting and invite spouses to participate when possible.
- Provide practical tools: Budget worksheets and other take-home resources make it easier for people to take the first step.
- Connect personal and company finances: Use relatable examples—like fixed vs. variable costs and personal income vs. gross revenue—to help employees see the link between their own finances and how the business operates.
These peer insights are a powerful reminder that financial literacy is more than a state of understanding—it's a culture we build together, one conversation at a time. Financial literacy improves everyday life, mental health, and your chance at a secure retirement. Even the basics can make a big difference. It all starts with education.
If you are interested in this topic and others like it, join one of the NCEO’s Peer Networks today!