Only 2 in 5 young adults are financially literate

IF just under 3½ hours each month is committed to financial education for:- 11 to 18 year olds, this could help ensure that the majority of young adults in the UK are financially literate. New research finds that the majority of young people enter adulthood:- "financially illiterate" which could harm their ability to make good financial decisions in later life.

New research launched by Compare the Market and MyBnk, with support from the Centre of Economics and Business Research (Cebr), assesses the current state of financial education in the UK, and models the beneficial impact of an increase in financial education in UK Secondary Schools on financial literacy.

Time currently spent on financial education during Secondary School...

According to the research, 61% of young adults do not recall receiving any financial education at School, compared to 29% who do remember receiving financial education. On average, those who did receive financial education lessons were taught for approximately only 48 minutes per month, or only 11 minutes per week.

While financial education is on the curriculum for UK Secondary Schools, with 78% of Teachers surveyed stating that financial education lessons are being delivered in Schools and 81% stating these were mandatory, in England, 80% of Schools are academies or free Schools, which means they can opt out of providing financial education.

Lack of financial literacy amongst young UK adults...

To understand the quality of financial education provided in Secondary Schools, the research also examines the financial literacy of young people, using the Compare the Market and MyBnk Financial Education (FinEd) measure. The research found that 41% of young adults in the UK are financially literate.

For those who did not receive financial education at Secondary School, but were classified as financially literate, 63% stated they received financial education from parents or carers, showing that financial education should not merely be confined to the classroom and that there is a role for parents, carers, businesses, and the wider community.

What needs to happen: the impact of enhanced financial education on wider society...

The findings suggest a statistically significant positive association between the average hours spent on financial education in School per week and financial literacy. An increase in financial education would enable a greater number of people to better manage their day-to-day spending and financial affairs, which in turn could positively impact the UK economy.

Increasing the share of financially literate individuals by a single percentage point, equivalent to approximately:- 55,000 young adults, requires, on average, a 24% increase in the average hours per week spent on financial education, or approximately 12 minutes per month.

To ensure that at least a majority of young people can be classified as financially literate, this research suggests that an increase of 44% in current literacy levels would be required, which in turn requires at least 3.4 hours per month of financial education for 11- to 18 year olds.

How we could get there: policy recommendations...

It's well known that Secondary Schools are constrained by competing demands on Teacher time and may lack expertise on the subject of financial education. Of those Teachers who said that financial education is being delivered in their School, 8 in 10 (80%) stated that they were personally responsible for preparing and collecting materials.

Teachers believe 12 days is sufficient to train up and be able to deliver financial education content. In addition, Teachers believe that, on average, 82 minutes is needed to prepare the material for an hour long financial education lesson.

Amongst Teachers who stated that more time would be beneficial to ensure that financial education is delivered at their School, either via more time being reserved in the School day for students to receive financial education, or more time ringfenced for Teachers to prepare, plan and/or deliver financial education, the majority (57%) believe that making more efficient use of the School day is the best way to find additional time. Examples include using evidenced quality resources, bringing in external resourcing such as financial education charities, or having dedicated internal resourcing.

Mark Bailie, CEO, Compare the Market comments:- "Everyday life is full of financial decisions, and many of these can be overwhelming if you don't have the tools to help you secure the best outcome for yourself. We know that most people leave School with an inadequate grasp of basic finance. This lack of financial confidence and understanding can have a real impact on their adult lives, limiting the choices of financial products available to them and with the potential to significantly increase the amount they pay throughout their lives. At Compare the Market, we're passionate about helping people save money and get great deals on their household bills. That's why we are partnering with MyBnk to help more young people get better access to high-quality financial education, removing financial stress and helping them gain the skills they need to manage money in a cost-effective way. It's clear that young adults at the start of their financial lives are bearing the brunt of inflation and the cost-of-living crisis. That's why we will continue to support MyBnk and work with:- policymakers, businesses, households, and Schools to think seriously about how we, as a society, can improve financial understanding."

Leon Ward, CEO, MyBnk comments:- "This research shows that ⅖ of:- 18 to 24 year olds are not financially literate, a number that is deeply concerning, especially given the current economic crisis and its impacts on wellbeing. Wider research shows that rising costs are the major worry for over ½ (56%) of young people, who reported it caused disruption to daily life, particularly their diet and sleep - 2 cornerstones of good health and wellbeing. Improving the financial capability of young people can help them cope with this situation, and prevent serious future problems, including poor mental health, unemployment, and homelessness. Despite our research showing the need for financial education, we recognise the pressures and constraints Teachers are under. That's why we strongly encourage the Government, Schools, businesses, and households to take advantage of external resourcing from organisations like MyBnk. MyBnk's financial education experts and resources save Teachers the time needed to train themselves, prepare the content and deliver impactful lessons. Given the combined economic and health benefits that financial education can provide, MyBnk remains committed to providing programmes across the country and calling for further prioritisation of this critical issue. Preparing children and young people to be financially confident and capable as they enter adulthood will provide rewards for us all."

Policy recommendations for the Government...

Guarantee 30 hours a year of financial education for every:- 11 to 18 year old regardless of which education pathway they are on The Prime Minister recently highlighted the importance of numeracy skills. MyBnk supports this but urges for a focus on money management and practical maths skills linked to this. This research suggests that only 41% of young people can be classified as financially literate. Therefore, this report is calling for all 11- to 18 year olds to receive 30 hours a year of financial education - calculated as the minimum amount for the majority of young adults to be financially literate.

MyBnk stands ready to help educational establishments and employers meet this minimum standard through our expert led financial education sessions and quality evidenced resources. MyBnk recommends reviewing how time could be created to accommodate these minimum required hours of financial education, for example by reducing time spent on other subjects, including it in the curriculum for other subjects, or making more efficient use of the School day.

The research also suggests that 63% of children not receiving financial education within Schools, but considered financially literate were taught by their guardian. This shows the critical importance of continuing financial education outside of Schools to maximise its impact. MyBnk therefore recommends Schools disseminate dedicated:- "guides" or "toolkits" for young people and guardians to use in financially educating their child as part of the 30 hours.

Include financial education in regulatory frameworks to establish high standards of teaching...

Alongside having a minimum provision of financial education, there is also a need to help ensure that it is delivered. This can be achieved by Schools and Teachers working with the devolved education departments and regulators across the UK to factor in a minimum provision of financial education as part of their grading systems.

Along with minimum hours, this would also look at the quality of the financial education being delivered. This would draw greater attention to the importance of having a minimum provision.

Although financial education is currently on the curriculum for State Secondary Schools, not all Schools are required to follow this, including academies and private Schools. Therefore, having Teachers and Schools partnering with both devolved education departments and their regulators and having financial education monitored and assessed will help to ensure that it is delivered more consistently across the UK.

Establish an awards programme to celebrate:- students, Teachers, parents and carers, charities and others who excel in financial education.

Similar to the:- 'Points of Light' programme where outstanding members of communities are recognised for their contributions, we believe that individuals and organisations going above and beyond to promote financial education should be rewarded for their efforts.

The Points of Light programme could be a blueprint for a financial education award for those who have made outstanding progress. This could give individuals and organisations a huge morale boost and bring closer attention to the importance of financial education. It would also help to ensure that financial education is a joint effort by policymakers, businesses, households, and Schools.

MyBnk recommends that this awards programme is run by the Money and Pensions Service or the Department for Education or equivalents in the devolved nations.
 

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