Lagging Financial Understanding Poses Problems for UK Families

Financial savvy is an important feature of adult understanding, because so many things relate to money. Not only that, but personal finance and budgeting concerns seem to be growing more complex, as financial relationships evolve in the UK.

Effective household money managers must now contend with big-picture financial matters, such as pension management and investments, as well as routine daily spending concerns. For some individuals, equipped with the knowledge to operate successfully, personal finance decisions flow from genuine understanding. For some other Britons, however, a financial knowledge gap leads to problems managing money.

Mobilising Resources for Financial Education

Maths and economics have long been a part of childhood education, but general financial education has traditionally lagged behind other mainstream subjects. That changed recently when the national school curriculum adopted a higher standard for direct financial education in schools. At the same time, many organisations are stepping-up to help close the gap in understanding that leaves some citizens unprepared to effectively manage their finances.

The Personal Finance Society, a professional body for the financial planning community is set to launch an education programme designed to reinforce financial learning in schools. The initiative, known as Education Champions, centers on building relationships with secondary schools and colleges, throughout the country.

Set to begin in September, the programme has begun recruiting volunteers for training this summer. Executives for the organisation hope it becomes a key part of the national curriculum, preparing young people for their financial lives and increasing awareness about financial planning.

Investment manager, Schroder’s, is putting-forth an online resource for financial education. The website targets millennials, providing information about investing. The initiative comes in response to a survey indicating more than 90 per cent of those polled would like to have a better understanding of investing principles and practices. The resource, MoneyLens, is set to offer expertise geared toward users born in the 80’s and 90’s, helping to round-out their knowledge about investments. Organisers hope the site will cut through confusing jargon and clarify misconceptions millennials have about money. Prospective topics include everything from money app reviews to specifics about auto enrolment.

Financial Lives Review

The Financial Conduct Authority’s (FCA) 2017 Financial Lives Review shed light on how many Britons lack adequate understanding about the financial issues they face every day. The review indicated that a knowledge vacuum about savings, investments, and budgeting caused more than 4 million individuals to fall behind paying bills and meeting other important financial commitments. It also highlighted statistics showing as many as 3.5 million Britons may be borrowing money from friends and family members, just to cover customary living expenses.

The review polled nearly 13,000 individuals age 18 and over, collecting responses about their financial lives. Results showed at least 50 per cent of respondents exhibit at least one of the signs associated with financial vulnerability. Those over age 75 showed the highest proportion of their population at risk, with nearly 70 per cent of individuals exhibiting signs of vulnerability. Although the close look at people’s financial status isn’t solely responsible for efforts to increase financial understanding, the data makes a strong argument for better financial education.

Though the call for comprehensive financial education often focuses on childhood and early-adult programmes, a related phenomenon impacts Britain’s aging population. According to one study, conducted in 2011, it is thought financial literacy begins to wane after age 60, while confidence in financial decision-making does not. This disconnect may cause financial problems for older people managing increased pension freedoms and other complex financial planning arrangements.

With so many details impacting Britons’ financial lives, thorough understanding is essential to effective money management. Research presented by the FCA, as well as other studies findings illustrate how important financial literacy is at every stage of life. As a result, the national curriculum and other educational resources now reflect greater emphasis on financial training.

Paul graduated in 2001 with a degree in Finance. Since then he has gone on to work for several of the UK's most well-known financial institutions.

An avid blogger and a huge football fan, Paul is here to guide you through the ins and outs of personal finance and perhaps save you some money in the process!

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