Best Practices for Financial Literacy Programs Among Local Governments

Pointing out that local governments have changed their retirement benefits since the Great Recession, and that these changes require more decision-making by employees, the Center for State & Local Government Excellence has issued a new practitioner-oriented report, “Financial Literacy Programs for Local Government Employees.”

The Center says financial literacy programs are critically important, as 61% of Americans cannot answer more than three of five questions correctly in a financial literacy quiz. Furthermore, 54% of Americans don’t have enough money set aside to cover three months of unexpected expenses, and 16% spend more than 20 hours a month worrying about personal financial issues while at work. Financial literacy programs can combat these problems, the Center says, resulting in more productive and engaged workers, improved morale, lower absenteeism, lower stress and lower health care costs.

However, only 26% of human resource directors report that their local government offers a financial literacy program and a mere 13% say their local government is planning one. Asked why they do not offer a financial literacy program, 45% said it is because leadership has not identified it as a priority, 30% say it is due to a lack of internal resources, and another 30% say it is because of a lack of financial resources.

Among those that offer a financial literacy program, 95% say it is the human resources staff that championed the program. Only 23% said it is because leadership was the champion, and a mere 15% said it was driven by employees.

Asked what their financial literacy program covers, more than three-quarters say it is planning for retirement and budgeting. More than half address debt and investments, and less than 20% cover banking and payment methods, long-term care and elder care, and non-bank borrowing.

As some local government workers have limited formal education, the Center notes, it is no surprise, then, that 64% of programs use plain language instead of technical terms. Only 3% use mobile technology, text messages and social media.

Ninety-one percent of financial literacy programs are offered to the entire workforce, and one-third also make them available to non-employees, such as spouses and dependents.

Asked what benefits they witness from financial literacy programs, 51% say workers increase their contributions to supplemental savings plans, 43% say workers become more engaged with compensation issues, and 41% say cost savings for the jurisdiction that at least partially offsets the expense of offering the program.

Best practices for practitioners

The Center recommends that local governments first conduct a formal, or informal, needs assessment to find out what topics their workers would like to be covered in a financial literacy program, as well as how they would like it to be delivered. The Center also suggests that financial literacy programs for local governments use easy-to-understand language and offer the materials in multiple languages.

The Center advocates for offering financial literacy programs to non-employees, and that financial literacy programs be made available on mobile devices, as well as through text messages and social media.

To get the buy-in of leadership, practitioners need to tell leaders how financial literacy programs improve productivity, reduce health care costs and improve morale and retention. Certainly, the Center says, it is important to evaluate the impact of the program, to communicate the impact to leadership and to use the information to continuously improve the program.

The Center notes that since the Great Recession, many local governments have not been able to fund wage increases and are shifting more benefit costs to workers. As such, it is important to educate workers on financial concepts, terms and considerations, the Center says. For retirement benefits, because local governments are reducing pension benefits, employees need to increase their contributions to 457 or 401(k) plans. Additionally, because some local governments are moving to high-deductible health care plans, workers need to be educated about health savings accounts (HSAs).

“As more benefit costs and management responsibilities are transferred to local government employees, their ability to understand and make financial decisions for themselves will increasingly be linked to their long-term financial security,” the report says. “It is essential for local governments to provide the educational tools necessary to best position their employees to make informed financial decisions.”

Topics such programs should cover, according to the Center, include planning for retirement, spending versus saving, creating a rainy day fund, planning for college, basics on buying a home, paying off debt and loans and non-bank borrowing.

The “Financial Literacy Programs for Local Government Employees” report can be downloaded here.