Do You Know Enough About Your Finances?
Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.
We believe that knowledge is power and the more you know, the better equipped you are to make good financial decisions. It is for this reason that we have partnered with the Open University Business School to create the True Potential Centre for the Public Understanding of Finance (PUFin).
We have provided £1.4 million in funding to establish the Centre and support its research, part of which includes building a number of free and interactive personal finance courses for the British public. These Courses aim to expand the public’s financial knowledge and teach them about saving and investing and to boost their confidence about money matters.
On 26 April, we released the third in our series of free personal finance courses, ‘Managing My Financial Journey’. This course focuses on financial services providers and the regulations that come into play when financial services are sold. Our previous two courses, which have been a huge success, ‘Managing My Money’ and ‘Managing My Investments’ are based around the basic concepts of personal finance and investing.
Why Financial Education is Vital
In order to help us fully understand the needs of the public, we survey thousands of savers each quarter through our ‘Tackling the Savings Gap’ campaign.
Recently, we asked:
‘How would you rate your understanding of personal finance, including budgeting and saving and investing?’
55% of respondents claim to have a satisfactory level of knowledge. However, in practice, the amount savers are putting into their pension is five times below the amount required to live a comfortable retirement. In fact, 54% of people have not even begun to save for their retirement.
With this in mind, we also asked:
‘Do you think more personal finance education should be provided?’
A massive 81% answered, yes. When asked who they believe should be responsible for delivering this education, 65% of people asked said schools and universities while 50% said the Government or government-run organisations such as the money advice service.
We spoke to Gillian Keith, a regular investor with us, about her own personal thoughts on financial education:
- What was your financial education? Self-taught?
When learning to manage my own finances in University, my family showed me a good example when it came to keeping my accounts in order, and not getting into debt. Some further reading as a student taught me the valuable rule ‘Pay Yourself First’, and I have always tried to adhere to this by saving at least 10% of my income before taxes and basic expenses. This common sense concept, as well as other basic financial tips, have got me a long way as a cautious but regular investor.
- What would you like to see available to people?
I would like to see basic financial management courses taught in schools. I believe we are moving into a time when more people will be self-employed, and when people will hold more than one job and change career frequently. This makes it even more essential that young people enter working life well equipped to make their own financial decisions. I also believe that financial planning is a confusing topic for people of all ages and walks of life, and that the more basic information available, the more chance people will have of making simple, informed choices for themselves.
- Who do you think should provide education? Schools? Government? Banks?
I think schools should definitely provide financial education, covering topics such as managing a basic household budget, the risks and consequences of getting into debt, the many different types of debt and why some are riskier than others, basic concepts of saving and investing, and most importantly the notion that everyone can save, not just the wealthy.
- What do you think is missing?
I think that the world of personal banking and finance is changing so rapidly, many people who grew up with more traditional models can’t keep up with the systems in place today. Internet banking is still a big challenge to older people, and they are potentially missing out on information and opportunities. I also think that people often rely on equally ignorant family members or friends for financial guidance, and that because finance is a frightening and socially unacceptable topic for discussion, many simply muddle along and hope for the best. The message needs to be put across that basic financial knowledge is just as important as knowing how to care for your health.
We believe that everyone has the right to learn more about managing their finance as it vital for a comfortable future. Over 100,000 learners have already benefited from our free courses and we’re delighted to extend the range today.
You can sign up for ‘Managing My Financial Journey’ on FutureLearn now or find out more about all of the courses.
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