New research reveals a critical need for financial education

A new research report, delivered by the PIMFA Under 40 Forum after a two-year, Covid-induced absence, examines how best to address both the ‘advice gap’ and the stimuli required to get different generational groups investing through the lens of Environmental, Social and Governance (ESG) criteria.

However, one of the surprise findings of the report was how strongly financial education – or rather the lack of it – resonates throughout the sample range. Highlighting the need for this from an early age, no less than 82% of respondents, in an even split across genders and across socio-economic groupings, believe that school and college/ sixth form is the most effective time to begin learning about investments and savings. This belief is especially prevalent in younger investors and is clearly a strong argument for the investment of time and money into furthering the financial awareness of school children.

Recent research from the Centre of Social Justice (CSJ) backs this up, with the startling findings that 24 million UK adults are not confident handling their money day to day, and that early intervention financial education is absolutely critical in preventing financial poverty and vulnerability later in life.

Alongside this, a separate report from the Organisation for Economic Co-operation and Development found that an astonishing 96% of teenagers worry about money every day. Surely this is a wakeup call as to just how vulnerable the average UK family is in terms of financial wellbeing, and how much financial education can help in ameliorating this.

Young adults must now navigate a financial landscape, evolving at a sometimes bewildering pace, whilst facing many important financial decisions, from managing their rent and household bills to taking out loans, for the first time. As the CSJ discovered, many young adults attribute their problems in this scenario to a basic lack of money management skills.

It is striking how many of those who experience financial trouble consider that boosting financial literacy would be an effective remedy. The CSJ poll found that 44% of all adults, along with around 65% of the 18-34 group, believe that their situation would improve with at least some financial education.

Too many in society continue to lack the basic skills which are the foundation of financial capability. Around nine million working-age adults in England have low literacy or numeracy, with five million lacking both. One in two failed to pass a financial literacy test run by the OECD, putting the UK well below other countries like France, Norway and Canada. Yet, despite progress made by recent governments, including the introduction of financial education to the secondary school curriculum in 2014, progress has been glacially slow.

The evidence suggests that we need to start at the beginning. Research by the Money and Pensions Service indicates that children’s ‘money habits’, which stick with them for life, are formed as early as seven years of age and shows how those leaving school without an effective financial education are at high risk of financial abuse, fraud and debt, with only one in three children currently getting any form of financial education at primary level.

As the above suggests, inclusion on the curriculum alone is not enough to guarantee quality financial education in schools; empowering teachers to deliver it is key. It must also be possible to harness the skills of both industry and the charity sector to help deliver this vital component in boosting skills. If our children can benefit from this now, society – as well as our industry – will in the longer term.