In three weeks’ time, the Chancellor’s new cost of living package will start to be felt in people’s pockets, relieving some of the immediate pressure on household budgets. These measures will shield those on the lowest incomes from some of the worst effects of the inflationary headwinds buffeting the Western world – but only temporarily.
To build Britain’s resilience in the years ahead, we need now to urgently renew our approach to financial education. Today the Centre for Social Justice publishes the findings of a major new inquiry, in partnership with Lowell, which sets out how.
Financial literacy – that is the skills, knowledge, attitudes and behaviours needed to manage money well – is sorely lacking in this country. The CSJ’s new report, On the Money: A roadmap to lifelong financial learning, shows that one in two of us have been found unable to pass a financial literacy test, while 24 million people – around half of adults – don’t feel confident managing their money day to day.
The research reveals that financial literacy is lacking throughout the lifespan, wreaking havoc on family finances and retirement prospects alike. Our polling found that an astonishing 46% of adults – roughly 14 million people – with experience of financial difficulty believe that poor money management skills contributed to their situation.
This should perhaps come as no surprise. From childhood through to old age, people now have a bewildering number of financial choices to make. As consumers are expected to navigate a fast-evolving world of new financial products, avoid inappropriate credit options and sophisticated fraudsters, strong financial savviness is not just a ‘nice’ to have, it’s a ‘need’ to have.
One in eight young people who have used a buy now, pay later credit agreement have been contacted by a debt collector, according to one study. Almost half (43%) of people aged 65 or over have been targeted by scammers, while 44% of all adults believe that their financial situation would improve with more financial education, increasing to two-thirds of those aged 18-34.
Today, our financial education offer is underpreparing people to manage their increasingly complex financial lives. Despite the introduction of financial education to the national curriculum for secondary schools in 2014, the CSJ has heard concerning evidence that this has not translated into boosting financial education as originally intended. Too many children still finish their journey through school without receiving high quality financial education. Indeed, two thirds of teachers believe students leave school with a low level of financial understanding.
To put financial education firmly back on the map, we propose a three-pronged solution.
First, we must start earlier. That means adding financial education to the national curriculum in primary schools, as it is in Scotland and Wales. Money habits and behaviours that will stick with children for life are formed by age seven, according to the Government’s Money and Pensions Service – yet just one in three children receive any education about money at primary school. This is also despite the National Audit Office finding there to be 55,000 ‘problem gamblers’ aged 11-16 in England and a further 85,000 at risk.
Second, we must ensure that the financial education which is already on the curriculum is taught in practice. We can do this by strengthening statutory requirements in schools and incentivising the use of evidence-based methods of teaching, such as experiential ‘learning by doing’ financial education, which is shown to have the highest quality long-term learning outcomes for pupils.
Finally, we must tackle low financial literacy in adulthood and later life. There are several ‘teachable moments’ in a person’s life, such as starting a new job, enrolling on benefits, taking a pension or seeking debt advice. A portion of the Chancellor’s welcome £560m investment in adult skills should be used to leverage the workplace, welfare system, further education settings and financial services to deliver financial education to adults of all ages.
Any suggestion that people can ‘financially educate’ themselves out of the cost-of-living crisis should rightly be dismissed as out of touch. But that doesn’t mean we should ignore the longer-term needs of our country. For if the Government is to achieve its ambition to build a high-skilled economy, financial education has to play its part.
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