Financial literacy — learn now, benefit later
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The UK scores poorly for financial literacy. Half the population has low confidence in making decisions to do with money, according to research by the Financial Conduct Authority. Numerous studies link high levels of economic deprivation with low levels of financial understanding. Groups with the least knowhow include those on low incomes, young people, women and ethnic minorities. For those whose budgets leave little margin for error, a good financial decision could be transformative, a bad one catastrophic.
The Financial Times today gives its backing to a new charitable campaign to lobby for change. Patchy financial education was a problem pre-pandemic, but the economic consequences of Covid-19 should galvanise a response from international policymakers.
The classroom is a good place to start. While financial education is nominally on the national curriculum across the UK, it is seldom a priority, partly because it lacks any formal assessment or examination. Given the pressures on teaching time, one solution is to inject more practical financial problem-solving into maths lessons.
Even maths-phobic students have a natural fascination with money in the context of their aspirations and life goals, as shown by the new wave of young investors drawn in by “meme stocks” and cryptocurrencies. Regulators have already expressed concern that too much financial “education” is being provided by bad actors on social media. Providing a better alternative in schools could address both problems.
A firm, foundational knowledge would give students the confidence to tackle money-related problem-solving as they progress through life, from student debt and buy now, pay later deals to pension saving.
The Scottish curriculum is already taking a more practical approach and injecting financial literacy into both maths and social studies teaching. Scottish students have the highest levels of financial capability in the UK, according to the government’s Money and Pensions Service.
Better communication is needed, too. The wider financial industry should rethink the design and wording of products. Research by the FT and Ipsos Mori found that barely half of 3,000 respondents were able correctly to compare the costs of borrowing via credit cards or bank overdrafts, regardless of their wealth, ethnicity or gender.
Learning needs to continue beyond the classroom. Further education, where young people have their first real test of managing money and taking on debts, is a key area. Employers also have a role; boosting financial literacy in the workplace makes sense as it is where lifetime savings are commonly accrued. As pension schemes become less generous, and employment more insecure, these are skills people need to navigate their financial lives.
This news organisation is keen to support positive change. The FT Financial Literacy and Inclusion Campaign, a new FT-backed charity, has been set up to educate and lobby for policy improvements. Where possible, it will involve FT readers and the wider financial industry in addressing the shortcomings, first in the UK, and later, around the world.
Not every child will inherit wealth, or the parental help and advice that often comes with it. But rich or poor, higher standards of financial education can be a lasting legacy for everyone.
To find out more and to pledge your support, please visit www.FTFlic.com
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