Last week the Centre for Social Justice launched the Financial Education Initiative, a new research and policy project with the aim of improving levels of financial literacy in England.
January is a time to reflect on the past and resolve for the future. But while some people use the New Year to get fit following the indulgences of the festive season, many others swear a vow to improve their financial health. This year, an emergent cost-of-living crisis of rising bills is putting even more pressure on families and individuals to make every pound go the extra mile.
Yet we remain a nation unsure about our finances. We find it easier today to talk about our mental health than our money, according to one recent survey. And the Money and Pensions Service has found that 24 million people do not feel confident managing their cash day-to-day.
This has major consequences. A new poll of 4,000 adults published by the CSJ and Lowell reveals that around half of those with direct experience of financial problems blame low money management skills for their issues, rising to over two thirds of young adults (68 per cent).
Of course, the financial situations we find ourselves in involve a range of complex and interlocking factors, many beyond individual control. Yet these findings highlight the extent to which people want to take back control of their finances – and see better skills as the route to this. Nearly half of UK adults (44 per cent) said they would be in better shape financially if they received more financial education.
The CSJ has joined forces with Lowell to review the existing financial education offer, examine strengths and weaknesses in the existing system, and present a package of recommendations for meaningful change.
We do not underestimate the scale of the challenge. Nearly one in two of us have been found to fail a comparative financial literacy test, putting the UK 15th among the OECD in terms of financial literacy competencies. This is well below France, Norway and Canada, and directly below Thailand and Albania.
Nor do we underestimate the depth of the problem. Some nine million adults are estimated to lack basic numeracy, and five million lack basic literacy. For too many, the absence of basic skills critically undermines financial health. The Government has shown it means business on skills, for instance the £560 million adult numeracy programme announced by the Chancellor at last year’s budget. And better financial education should lie at the heart of this agenda.
But we have to start early. Young people face an ever more complex financial landscape with the market for products like Buy-Now, Pay-Later booming during the pandemic (and expected to grow by 400 per cent by 2025). As products continue to come to market faster than they can be regulated, it is important we equip young people with the tools they need to make sound financial decisions. Meanwhile, four in five people say they didn’t receive enough practical money management lessons at school. And despite research suggesting money management habits develop as early as age seven, only one in three children receive any form of financial education at primary school.
The costs of failure are social as well as financial. We found that over one in four adults (29 per cent) said their financial problems have had a negative impact on their relationship with their partner. And nearly one in ten young people entering the workplace said their financial problems had a negative impact on their relationship with their employer. Money management skills are therefore a matter for the whole of society, not just individual wellbeing.
New Year Resolutions to make better financial decisions are to be admired. But without the skills and confidence to deliver, even those with the best intentions are liable to start next year once again in the same position. And so we want to hear from you if you have experience of these issues – whether that’s delivering financial education as a practitioner and frontline charity or working in policy – to help inform our research and recommendations. For with the up-to-date vision for financial education we are seeking to develop and put to Government, we hope to help more people turn their resolutions into reality.