Why finances are a matter for education

in five people deemed financially illiterate. And it isn’t just children – in a report released last October the Financial Conduct Authority found half of adults to be financially vulnerable. The regulator was particularly concerned about the number of consumers opting for high-cost credit products, such as payday loans. But who is to blame? Arguably the financial services industry, including the big banks, is one of the worst offenders.

Partly that is down to appalling behaviour evidenced by scandal after scandal – pension rip-offs, unscrupulous payment protection insurance, mortgage protection insurance mis-selling, outrageous levels of debt interest … it goes on and on. Then there are the scams and the Ponzi schemes – some so plausible that even the financially astute can get taken in.

Why save for a pension if it might well be “stolen” from you at some point in the future? Why take out insurance if when you try and claim you find yourself denied by a line of red tape hidden amidst a mass of incomprehensible jargon in a contract of which you lost the will to live half way through reading?

And young people, perhaps already £50,000 in debt from university, too often find themselves bombarded on all sides – save for a mortgage, save for a pension, take out life insurance, upfront savings interest offers which snap back to virtually nothing after a year. Ms Goodland gets some of this. She noted: “In some ways financial illiteracy is perpetuated by the financial services industry’s reputation for being unapproachable and incomprehensible.”

Efforts abound to try and combat all this – the Personal Finance Society, the Money Advice Service, bank promotions, Government initiatives galore.

Some believe in a ‘catch them young’ philosophy.

In 2013, personal finance became a mandatory part of maths and citizenship lessons in secondary schools.

Should the message start in primary school?

Sixteen savings and investment firms recently launched KickStart Money – a collaborative project aimed at taking financial education to more than 18,000 primary school children.

However, back in 2008, research by the London School of Economics concluded that better financial education would do little to improve financial decision-making. It found that financial behaviour was better explained by human biases than by inadequate understanding.

In our experience the dearth of financial acumen is very definitely an issue.

We meet clients who are otherwise well educated and informed, in good jobs or running businesses who have a very modest knowledge bank in respect of savings, pensions, protection and mortgages.

Many will research topics that are of immediate interest but often people don’t know what they don’t know.

Consequences are, of course, that they have insufficient savings (short term and longer term), insufficient retirement provision, are under insured and don’t run their mortgages and borrowing at peak efficiency.

So, there’s still much to do. Trevor Law is managing director of Eastcote Wealth Management, chartered financial planners, based in Solihull. Email: tlaw@eastcotewealth.co.uk The views expressed in this article should not be construed as financial advice