While the current economic problems in the UK can’t really be laid at the feet of consumers, there’s no doubt that widespread poor financial management isn’t helping matters. This ranges from naivety in investment to a general “have it now, pay tomorrow” culture that’s fuelling debt.
A recent survey suggests that this isn’t set to improve. The study, by Compare the Market and MyBnk, found that only 41% of young adults are financially literate.
The State of Financial Education at School
Financial Education lessons are mandatory in English secondary schools, so there seems no reason for such low levels of financial literacy. However, in the survey, 61% of young adults claimed not to have received any lessons, while only 29% positively remembered them.
Although the study didn’t go into the reasons for this discrepancy, it’s noteworthy that 80% of schools are either academies or free schools. While these are encouraged to follow the mandatory curriculum, they are able to opt out of specific subjects. These figures suggest that many of them may be opting out of Financial Education lessons.
Financial Education at Home
If you’re of a generation similar to me, you may remember learning the value of money at home. We had to learn to budget our pocket money and to do work to earn more. While not everyone learnt the lessons, we had a good chance to become financially literate.
While this kind of grounding is rarer than it used to be, the survey suggests that it hasn’t disappeared. The 29% who remembered financial education at school is considerably lower than the 41% who are financially literate. A large majority of the rest said that they learnt about money from their parents or carers.
How Financial Illiteracy Might Affect You
It’s likely that you’re financially literate yourself (although none of us are so perfect we can’t occasionally learn something new), but that doesn’t mean these findings shouldn’t concern you. For a start, if you have children or grandchildren, are you making sure you give them a good grounding in how to manage their financial affairs? Because, as you’ve seen, there’s no guarantee they’ll get that at school.
Besides this, though, as a business owner, financially illiterate customers could be at best a hassle you don’t need, and at worst a money pit. If they subscribe to the “have it now, pay later” model, they might apply that to what they owe you. And the chances are that “later” could be a long time coming.
Doing whatever financial checks you can on prospective customers should weed out many of those whose financial illiteracy could threaten your cashflow. And, if you find someone is intending to pay you later (or never), give me a call to see how I can help you give them a crash-course in financial responsibility.