According to The Money Charity, a person in the UK is declared bankrupt every 5 minutes and 12 seconds and a house is repossessed every one hour and 15 minutes.
The average debt per household, including mortgages, is £57,490 and 35% of households have no savings put aside at all. With the likelihood of inflation and rate rises on the way, Brits should be getting prepared for when debt becomes even more difficult to deal with.
Securing consumer credit has become much easier over the last couple of years, which has benefited many, but has also led to fast growing levels of personal debt for others. To be equipped to make informed decisions in this increasingly complicated financial world, there is a far greater need for financial literacy than ever before.
Why is financial education important?
The growing complexity of financial markets means that people are having to choose from a range of sophisticated financial instruments for borrowing and saving. And the decisions cannot be made lightly as the impact of making the wrong choice may have a huge impact on an individual’s future.
Most notably, as the responsibility of pension provision increasingly shifts from the government to workers, the ability to save for the future is more important than ever. This can only be done effectively if people making the decisions are financially confident.
How financially literate are we in the UK?
The Global Financial Literacy by Standard and Poor’s surveyed more than 150,000 adults in 140 countries across the globe and found that shockingly, only 33% of adults worldwide were financially literate. This means that a huge 3.5 billion adults around the world, most which are from developing countries, do not have a basic understanding of financial concepts.
On a positive note, the UK was ranked as the sixth most financially knowledgeable country in the world, with Scandinavians leading the way. In Norway, Denmark and Sweden, 71% of people answered three out of four questions about savings and investments correctly, while 67% were on the money in the UK.
Resources to get financially literate which are on the money
So, whether you’re one of the 67% of financially educated Brits or not, it’s in your best interests to improve your awareness of money matters, whatever level you’re at. Having the ability to budget effectively, understand money-related decisions and knowing what products and services are available, are all important life skills that everyone should possess. Here are some great free resources available to kick start the journey to becoming financially savvy.
The Money Advice Service (MAS)
The MAS was established by the UK Government to provide clear, impartial advice on financial matters. It’s the UK statutory body for improving people’s comprehension and awareness of financial issues. The three key areas that the MAS offer support with are money advice, debt assistance and financial capability.
As well as informative guides and educational videos, there are also useful tools, calculators and letter templates available to help navigate through complex financial topics. Not only is there an array of free online finance education to access, there is also independent advice available via webchat or over the telephone.
National Institute of Adult Continuing Education (NIACE)
NIACE acts as the UK’s voice for lifelong learning. Financial learning is a key area of NIACE’s work to improve the lives of adults through education. With the insecurity of the current economic climate, financial know how is increasingly being acknowledged as a crucial life skill.
One of NIACE’s key resources is Money Matters to Me. A free, interactive online finance education resource; it’s perfect for people who want to refresh their money skills or learn about personal finance. The website covers topics from how to use an ATM or an online banking app to how to plan for retirement or coping with unemployment – and everything in between.
As online finance education courses are becoming increasingly popular, websites such as ALISON offer a huge range of interactive lessons which can be accessed by anyone, free of charge, from anywhere in the world.
From courses about managing personal finance debts to understanding risk and reward in finance, the comprehensive lessons are delivered in manageable 2 – 3 hour packages. For a more complete understanding, the 10-hour financial literacy course covers seven modules from how to set up a bank account to planning for retirement and will put students on the path to financial fitness.
Investopedia is an excellent starting point for those who are confused by the terminology used in the financial world. The site cuts through the jargon and defines key terms, covers relevant topics and provides courses on issues such as personal finance and learning to trade.
The website is focused on news, insights and tutorials that help with understanding of investment concepts. So, whether you’re interested in learning more about the changes in gold price, or want to study the ins and outs of the stock exchange, then this is a great place for you to start.
The site also features a clever ‘Stock Simulator’ that enables users to experience what it’s like to trade stocks in a safe environment and without running the risk of losing any money. The whole site is a great resource for all things finance, and offers far more than just a financial dictionary.
Teaching the younger generation
Going forward, the key to developing financial literacy skills in the UK is to educate people from a young age. Research has shown that most children’s financial habits are formed by the age of seven, so the earlier children are exposed to financial education the better.
Since September 2014, key stages 3 and 4 children have been receiving financial literacy lessons as part of the maths curriculum. The objective is for schools to prepare young people with the skills to manage their finances as they grow.
The curriculum includes the importance of budgeting, credit and debt management, as well as understanding of financial services and products. For older children, there are also schemes such as the one run by the Young Enterprise. The financial education charity provides courses for teenagers to improve their financial knowledge further. Challenges are set to raise awareness of the complex world of financial decision making.
So, read more personal finance blogs, listen to money related podcasts, attend some online finance education courses and budget more effectively with the help of apps and other technology. As you become more confident in your own abilities, share your knowledge with your children so that they can become financially literate too.