In January 2020, Business Insider reported that nine out of ten consumers in the UK feel undereducated in terms of their personal finance.
It’s a staggeringly high figure — particularly given that with the fintech boom in 2014, many new companies focused on closing the knowledge gap and helping more consumers understand exactly how their finances work. The major banks have also launched initiatives to get people talking about money, to teach their children about money, and to feel more in control of their money in general.
Yet nearly half of British consumers think that their bank needs to do more to help them make financial decisions (47%), with just under a quarter believing that banks have misled them with advice. Moreover, 72% currently don’t invest in stocks and shares or in investment funds — and a fifth of these said this is because they simply don’t know how.
The problem is that the UK has repeatedly ranked quite lowly against other developed countries when it comes to financial education. According to a study from UCL, a third of adults in England and Northern Ireland can’t work out the correct change for a shopping trip, 40% can’t apply a simple discount, and more than half failed to interpret basic financial information from a graph.
But here is the thing — your financial education is so much more than knowing how to count your change. In fact, it also goes beyond knowing things like the difference between AER and APR, or what a credit score is, or how to open an ISA (though all these things are useful).
Your financial education is what helps you understand how to make money and spend money, how your money can work for you, how to look after your health or your family’s health. It ensures you’re financially prepared for college or marriage or a change in career. It’s what empowers you to make money moves, to feel confident whilst investing, or in control when taking on debt.
Alan Donehan from the Rebel Entrepreneur podcast says, “The three main resources you have to manage in life are time, energy and money. Learning how to use them, invest them and work with them is one of the most important things you can do in life. You can spend your life worrying if you will have enough or you can take control of your finances, learn how to manage them and eventually have them work for you. As you go through life your employer is going to talk to you about pensions, your bank is going to try and sell you investments and you need to know how to decide what you are going to do.”
In a nutshell, a financial education equips us with the skills and base knowledge from which to manage our money effectively. A financial education is a strong foundation for our financial decisions. It’s what sets us up for success.
Where do we get a financial education?
Most people’s financial education starts with their parents or family. TheYoung Person’s Money Index reported that nearly three quarters of young people in the UK say they get most of their financial understanding from parents and other family members. This isn’t a surprise to anyone — in our blog on managing money as a parent, we talked about how many financial habits stem from our childhoods, including what stresses us out and helps us feel in control.
However, it is problematic when it comes to financial education given that so many adults don’t feel that they truly understand their money, let alone able to teach it to their kids.
One answer has been to introduce financial education into our school curriculums. After much lobbying by activists, money lessons became part of the assigned work from Year 7 — GCSE in 2011.
By proactively educating young people about money from an earlier age, the hope is that they will grow up with key money management skills and positive financial habits that will support them even in challenging times.
MyBnk, the financial education charity, reports that around 52% of students now receive some form of financial education (up from just 10% in 2007). And the results are being felt — today two out of three UK primary school pupils are now actively working towards a savings goal and around 70% are able to stick to their money plans. Plus, 59% of students who couldn’t delay instant spending gratification, now can — no mean feat, as we all know.
The problem is that money isn’t about good grades
Money is about those everyday decisions — from our grocery spend to our pension contribution.
And there is still much more to be done. In 2019, research showed that 18–24 year olds are still the most likely age group to turn to payday and high-interest loans to make ends meet and that the average amount of unsecured debt is only just under £1500.
Talking about Buy Now Pay Later (BNPL) products and her campaign for greater regulation of the BNPL space, Alice Tapper from Go Fund Yourself noted that financial education is not just about teaching children about debt in schools. It is also about consumers being offered the right information at the right time for them.
“Financial education happens throughout a lifetime,” she says, “And especially at the points where we’re making big financial decisions. Personal responsibility is a good thing but that requires people to have information and an education.”
So where can adults, young and old, learn more about money?
Charities like MyBnk and initiatives like BlackBullion or Boring Money are a good place to start. They provide expert-led financial education programmes, bringing money to life and helping people build positive mindsets and habits as well as their financial knowledge.
Of course, money isn’t something we necessarily like to talk about — so seeking out the resources that work for you is essential.
As Alan says, “We need to inspire people that it is possible for them to not only take control of their lives but to create the financial future they can’t even dream of. People have to believe it is possible for them to win the game and create an amazing future. We need role models who have done it that will work to inspire adults that it is possible for them as well.”
But we’re all different. Personally, I like to follow social accounts and read books about money, but some of my friends prefer podcasts and others have done online courses. What inspires one person may feel dry and dull to you. Consider what makes you want to learn and follow what brings money to life for you.
After all, financial education doesn’t begin and end at school.
According to Alan. “It is a lifelong process and something that people should commit to continuing throughout their adult life. Finance in the UK isn’t seen as sexy and exciting; people think it is boring. What they haven’t realised is the freedom that a financial education can bring.”
Authors: Harriet Allner and ikigai
Harriet Allner is a writer, blogger and fintech specialist. She cares about stories that matter and is passionate about promoting conversation around money positivity and financial feminism.
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