With efforts underway to strengthen school-age financial education in the UK, adults’ financial knowledge and skills are also under scrutiny. According to some statistics recently compiled, it would seem money handling savvy is not at a level one would expect among adults.
Strong financial skills include the ability to manage money, calculate costs, and plan for your financial future. If you feel as though you’re lagging behind in these areas, you’re not alone. A recent study took a look at adult financial abilities across the world, assessing participants in more than 30 countries. The results compiled by researchers illustrate significant weaknesses in people’s skills handling money.
Financial Literacy Put to the Test
Without reasonable financial capabilities on their side, people are at greater risk of experiencing difficulties during their lives. From problem debt to poor retirement planning, the consequences of financial missteps can create a domino effect, leading to ongoing financial strain. For that reason, it is vital to learn the fundamentals early in life and to apply the sound financial principles to your personal finances.
Staying informed about economic trends and financial policies provides a sturdy foundation for monetary success. And when you have a particular financial need, such as a mortgage or a loan without an extensive credit check, evaluating multiple lending alternatives gives you the tools needed to make prudent financial decisions. A recent financial report from Cambridge University and University College London seems to show many individuals have lost sight of some of these financial fundamentals.
The scope of the study goes well beyond England, but the trends identified are present in the UK, as well as other regions studied. The sweeping research looked at more than 100,000 results from 31 countries, analysing performance on the Programme for International Assessment of Adult Competencies test completed by the participants.
One of the parameters tested involved routine numerical skills, commonly applied in daily life. According to the study organisers, the results are bad enough to warrant policy intervention, straight away. The researchers concluded that many adults lack the basic financial skills needed to successfully navigate everyday financial conditions. They used four questions to determine each study subject’s level of financial literacy.
Widespread Fundamental Failures
In order to assess how well adults understand basic finance, surveys asked questions about common financial circumstances. In one example, it was found that at least a quarter of all participants had a hard time calculating how much change they would receive from a cashier, when buying several items. Unfortunately for the home country, the failure rate rose to one-third for Englanders attempting to work out the change for a simple transaction. The basic survey questions would list a series of items and their prices, asking subjects to determine change for a certain note.
Another take on numerical testing supplied a per unit cost and asked respondents to work out the cost of related quantities. Researchers provided the price of a litre, for instance, and asked for the corresponding cost for a third of a litre. By this measure, one-third of those involved in the study failed to work out the correct answers. Similarly, most of the people studied failed to figure the correct amount of a discount when the calculations were slightly more complex than “buy one, get one free” and other obvious offers.
Graphs were also introduced into the study, mimicking the types of charts often used to convey information about the economy and to illustrate other financial principles. Accurately reading the simple line graphs proved vexing for half the people asked to interpret their meaning. In some countries, the share of incorrect responses represented three-fourths of the answers given.
It is thought the study results illustrate a fundamental lack of financial understanding among adults. And that the knowledge void could leave people unprepared to make rational decisions about saving, spending, and banking. According to the study’s organisers, unless policies are implemented, to better drive home basic financial lessons, people will remain without the acumen needed to effectively manage matters such as saving for pensions, borrowing responsibly, and buying property.