The dynamics of the problem
- There is a huge lack of financial education in the UK and there is no compulsory school curriculum coverage of this topic and a lack of information available to teachers who want to teach it anyway.
- Financial education is therefore largely left to parents and to charities like Maybank who have interacted with 33,000 children and young adults which is great but is only 0.5% of the number of the UK’s school aged children.
- Girls tend to be more comfortable than boys in talking about saving money but in practice money is not a cool topic for any children and patterns of actual spending behaviour don’t really have a gender bias.
- In a survey of young adults (up to age 25), 59% couldn’t understand their pay slip, 18% don’t understand their bank statement, 39% have no current account and 40% have never been to a bank.
- The FCA admits that the general public don’t understand compound interest and therefore the benefits of long term saving.
- We discussed the importance of persuading parents of the need to educate their own children and improve awareness of financial matters in the same way parents help children with their academic homework.
- We must acknowledge that level of financial education is not linked to wider academic abilities or wealth of the family – this was anecdotally supported by the roundtable delegates.
- Lack of financial education poses a risk to clients unable to understand advice that they receive.
- In the long term it is in the commercial interest of advisers to get more involved in helping with the financial education of the next generation of future clients, particularly when discussing intergenerational wealth transfers.
- Helping explain monetary matters in a way people can relate to rather than using financial jargon is a key aspect of financial education but it also a vital skill for many a cash flow planning conversation with a client
- It would be good PR for the financial planning profession as a whole; and individual firms to be seen to be supporting charities promoting financial education for children.
Expert: Michelle Heywood, MyBnk
Facilitator: Richard Clarke, Independent Consultant