UPDATED AT: July 15, 2024
At its core, financial literacy is understanding how money works, budgeting for expenses, and making smart financial decisions. It includes the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.
Researchers at MarketWatch Guides concluded that only 57% of adults in the United States are financially literate in 2024. Lack of financial literacy is most common among young people and those with limited access to education. The construction industry is predominantly made up of blue collar workers who don’t have education beyond high school.
Sadly, many of these workers struggle to maintain a strong financial foundation because of this education gap, as only a third of high school graduates reported possessing a retirement account or an emergency fund.
In this article, we will cover the impacts of financial literacy in the lives of construction workers, and how employers can enhance this important skill for their workers.
Blue-collar workers, especially those in construction, often have lower financial literacy compared to white-collar workers. This gap is caused by multiple factors: such as differences in education levels, access to financial education resources, and varying degrees of financial experience and exposure.
Recent studies show many blue-collar workers lack basic financial knowledge, such as understanding interest rates and inflation. This financial illiteracy is intrinsically connected to education and class status, as blue collar workers don't usually attend higher education.
According to the Bureau of Labor Statistics, over half (56.4%) of construction workers have only obtained a high school education or haven’t completed high school at all. Only 18% of construction workers have a bachelor's degree or master's degree, compared to 44% across all industries.
Research also shows a strong link between financial literacy and savings habits, independent of income and education. People with higher financial literacy are more likely to save money, using both formal bank accounts and informal methods, compared to those with lower financial literacy.
In this section, we’ll outline the long-term consequences of being financially illiterate. We’ll shed light on the ways individuals may make poor money choices due to a lack of understanding about their finances.
Debt Accumulation: Without a foundation knowledge of financial literacy, many workers end up with an overwhelming amount of debt. Being unaware of terms such as interest rates, credit scores, payday loans, among others help employees to stay in an never ending cycle of debt—which is very hard to get out of.
Inadequate Retirement Planning: Unfortunately, many workers don’t fully grasp the importance of early retirement planning due to financial illiteracy. Not planning retirement can lead to a dependence on state pensions and financial instability in a vulnerable stage of life.
Missed Saving Opportunities: Another critical issue of financial illiteracy is the amount of missed opportunities for investments and savings which in the long run are deeply missed among workers. Financial illiteracy limits financial growth and stability for employees, as they miss potentially profitable investments.
Moreover, not saving money is related to poor money management habits, such as spending impulsively and not organizing your money in a well-planned budget. Both often stem from a lack of financial education.
Slow Career Growth: A major long term consequence of financial illiteracy is lack of professional growth. Workers may not realize it now, but a lack of negotiation skills, investment in career development, and understanding the financial implications of career choices can impede them from growing and achieving their full potential in their respective jobs.
Impulse Buying: Impulse purchases are another common problem. It happens on the spur of the moment, usually triggered by emotions and feelings and is not consciously planned. Construction workers might buy a new truck or set of tools without considering the long-term consequences, which can lead to financial instability.
Low financial literacy often results in poor financial habits, such as accumulating high-interest debt or failing to save money. These habits, in turn, lead to bad financial outcomes, such as financial instability.
The resulting financial stress can cause workers physical and mental health problems, including anxiety and depression. In the construction industry, this financial stress can be particularly dangerous. Stressed workers may become less focused and more prone to accidents, compromising their safety and that of their colleagues.
This is a broad and complex issue: most American workers experience financial stress. A CNBC Your Money survey found that 74% of Americans are stressed about personal finances, with many unsure about the value of 401(k) contributions. Moreover, almost a third of the American workforce still reports some level of financial stress—and that financial worry is following them into the workplace.
High levels of financial stress can lead to mental and physical health problems. 32% of US workers say financial stress affects their mental and physical health. This rises to 42% among 18-24 year-olds and 37% among 25-34 year-olds.
Managers need to be aware of these high levels of financial stress amongst their workers, and find ways to offer assistance, as a financially stressed employee is two times more likely to quit.
With the industry already suffering from a labor shortage and recruitment problems, employers must be proactive. Employees will not make the first move when it comes to talking about their finances. A YuLife survey shows that more than half (53%) of US working adults would be uncomfortable telling an employer that they feel financial stress. However, employers can use a number of techniques to improve financial literacy and reduce financial stress, which we’ll discuss in the next section.
Financial literacy helps workers make better financial decisions, reducing stress and improving overall well-being. Financial strength is also a health element as it allows workers to have more resources to seek immediate mental and physical health care.
By focusing on these strategies, employers can improve the financial literacy of their construction workers. In the long term, the strategies below lead employees to greater financial security and better preparation for retirement.
Companies can provide educational workshops and programs that teach workers about the complex financial literacy terms that are useful in their day-to-day lives, especially in the construction industry. A good example would be seminars on saving and budgeting for employees.
Encourage the use of tech tools like financial literacy apps and online budgeting platforms in your company. For instance, a service like Brawn can help workers achieve their life goals, financial security and improve their financial stress.
Managers should connect employees with financial advisors for personalized advice and guidance on budgeting, debt management, and long-term financial planning. It’s crucial that managers promote financial literacy resources, ensuring employees have the necessary tools needed to make informed financial decisions.
According to the Corporate Finance Institute, improved financial literacy helps workers make better financial decisions, reducing stress and improving overall well-being. Financially literate workers perform better on the job and are safer because they are less distracted by financial related worries. In the long term, it leads to greater financial security and better preparation for retirement.
More specifically, the benefit of financial literacy is that it empowers individuals to make smarter decisions about their finances. In addition:
Financial literacy helps workers avoid big errors when managing their money. For workers who are unaware of financial strategies and concepts, seemingly simple financial decisions may have long-term implications that cost them money or impact life plans.
Learning about saving and emergency preparedness helps individuals get ready for uncertain times. Regular saving can cushion the financial impact of losing a job or facing an unexpected expense.
Understanding budgeting and saving enables employees to create plans that set expectations and keep them accountable. This way, they can work towards achieving important financial goals, even if those goals seem out of reach today.
With financial knowledge, individuals can make major life decisions with greater confidence. Becoming financially literate ensures financial stability, reduces anxiety, and helps workers confidently achieve financial goals.
Financial literacy helps American workers make better financial decisions, leading to greater financial security and well-being. A lack of financial literacy can cause long-term economic challenges and health problems for workers. But employers can help. By implementing one or several of the strategies mentioned above, employers can improve the financial literacy level of their employees. This will not only reduce financial stress among workers but also foster a more trusting and supportive relationship between employers and employees.