With cost of living pressures and rising debt, managing personal finances is critical. High interest rates and online fraud pose real challenges for the unwary. Yet financial education still has a low profile, and many young people enter adult life ill-prepared for any money problems. The UN World Day for Education should be a call to action to improve financial literacy.
Being an informed and critical citizen means understanding the importance of finance; economics is about allocating scarce resources. Greater focus on financial literacy can help address inequalities, and empower people to make money work for them. The gaps in financial skills vary from country to country; the gap between rich countries and poor ones is closely tied to the rate of financial literacy. More financial education everywhere should drive good long term decisions and a fairer world.
Schools face competing challenges on the curriculum, and it seems an easy choice to leave much of financial education to outside agencies and learning through experience. But money mistakes are a cruel lesson. In the digital age, with banks moving from the high street, there is a lack of trusted advice. It is now harder for parents to pass on skills when children face a different world, much invisibly conducted online.
Consumers need help to deal with fraud and digital challenges. Much of the questionable promotion on Bitcoin, dubious investment schemes and risky trading lies beyond the day-to-day regulation of established financial firms. There will always be unregulated areas that target the public. There is a strong case for teaching about money alongside skills to stay safe online and spot fraud.
Poor financial wellbeing - affecting millions of people - is holding the UK back. This includes those with insufficient information to plan for their retirement and more than five million children estimated not to get a meaningful financial education on these measures. A key element of preparing young adults for working life should be building skills in financial resilience. This involves understanding the importance of keeping a watch on finances, and on spending in particular. It is important to teach how to build a financial cushion and cope with periods of lower income or change in circumstances. Everyone should know how and where to get help in the event of a financial shortfall.
While there are levers to help to create ethical firms and a helpful regulatory framework, building a nation of empowered and capable consumers will take much longer. It is tempting to force banks and investment managers to lead some of this work and pay for it, but that might only meet one aspect of financial literacy. A broader view is needed of the skills that must be embedded in the population. It is too important to be left to the financial services sector alone. Everyone needs to know how to manage personal finances, household budgeting and savings to help cope with the unforeseen.
However, change is underway as many financial firms redirect purpose towards broader goals serving society. Corporate purpose and culture should address individual financial wellbeing rather than just product sales. Increasingly, younger employees in these firms want to see their work as serving a purpose for society - not just a job. And, lack of confidence in finance may also be deterring some from work in the financial sector.
The rapid move online in recent years has transformed the financial services landscape and relationship with customers. Customers now face the additional challenge of digital deflection, with inaccessible service or long waits in call queues, as they attempt to manage their finances. Many are struggling to cope with this change, with the new barriers to good service simply having been imposed by providers. It points to an urgency in improving financial education more broadly - particularly in those now out of the education system. There is no clear champion to lead that training.
Some progress has been made. Auto-enrolment for pensions and initiatives like payroll savings establish good behaviour in a low cost and well regulated way. This helps those in well paid secure employment, but many younger people continue to work in the gig economy - without the same employment continuity or provision for savings. There is a need for financial education to recognise the insecurity of some employment, and the greater onus it leaves on the individual to manage finances.
The OECD believes financial literacy is a core life skill for participating in modern society. Children are growing up in a complex world, involving daily financial choices - poor financial decisions can have a long lasting impact. Education policy must see learning about money as a core skill.