Is financial literacy particularly poor in the uk?

[latetothefisting]

Just something I've been pondering. Based on my work experience, and threads on MN, MSE, etc. Is financial literacy particularly poor in the UK, (and apart from my own anecdata, apparently we rank ranks below OECD average www.fincap.org.uk/en/articles/levels-uk) and if so, why and what can we/should we do to improve it?

E.g. there's a thread atm where a poster is asking what the advantages are of using a credit card to book a holiday, something I thought was obvious (greater protection, building credit score, even occasionally cashback) but apparently not. Loads of posters who don't understand their electric and gas bill, why they need to know their standing charge and charge per KWh rather than what the energy company says will be their dd per month (and why that might not be accurate). From work people who don't understand that they have to pay their council tax monthly or upfront, not after the year has ended, or the difference between necessities and luxuries and how to budget for both. From the MSE forums, people who have run up huge debts (and are now, fair play smashing reducing them) because they never knew basics like they had to pay back credit cards, plus interest. Nobody in my workplace understands how our pensions accumulate! And these are all what I would think of as basic things essential for general living, not even going into investments, stocks and shares, crypto and NFTs, compound interest or anything particularly complicated.

Apparently despite being comparatively rich we have one of the worse savings rates (as a percentage of our disposable income) in Europe, by a huge margin.

Not knocking individuals at all - I'm a firm believer of you don't know the things you don't know - and I'm sure there are loads of things I don't know that others would think is basic general knowledge. Just wondering WHY so many people don't know these things - is there a vested interest by the govt in keeping us financially illiterate? And how can we improve things - it's easy to say basic finance should be taught in schools, but what do we remove to make space for it? But if it's not for schools, but for parents to teach their kids, how does that work when the parents don't know themselves?

@wanttomarryamillionaire

I wish i had been taught financial management at school! I was up to my eyeballs in debt as soon as I could get hold of credit and have been in and out of debt ever since. Im absolutely terrible with money and still don't understand half of the things I should know now in my 40's.

What would they have taught you that would have changed your situation though?

Did you use that credit card because you didn’t think you’d have to pay it back? I doubt it.

Did you not know you’d pay interest? I’m not talking the details of compound interest, or the maths of calculations - just the basic of, you pay back more than you borrowed.

Did you use it because you needed essentials and you didn’t know about benefits? Possible but doesn’t sound like it.

It sounds like you made the typical impulsive, short term instant gratification action of youth… and that’s not a criticism! Would a school lesson have changed that?

Would it have been more effective to legally limit the accessibility you had to credit?

I mean this kindly… if you’re terrible with money and don’t understand things you feel you should know now, in your 40s, it’s not the fault of what you weren’t taught in schools.

I personally think MSE in better than MN for money questions - but any one of the things you feel you should understand now - why haven’t you asked them here? Do it! Start a thread, one question at a time

@Cocomarine I literally had no concept of how much interest I would need to pay back. It didn't seem to me to be like spending real money. I had no idea about financial planning, credit scores etc! I really would have benefited far more from learning those sort of things in maths than i ever did from learning algebra etc! My credit score is awful now but that suits me because If I can't afford something outright I can't buy it, or i have to save for it. I tried very hard to impress upon my kids not to end up the way I did financially and thankfully they are all pretty sensible with money. I even went bankrupt at one point owing over 20k, this wasn't a deterrent though because as soon as my bankruptcy was discharged after 12 months i was getting offered credit again. For someone like me who doesn't own an expensive car and rents a house bankruptcy is an easy way out as i have nothing they can take from me to repay my debts!

Yes! I find this really interesting as have lately been educating myself on financial management, starting with getting YNAB 4 years ago, and I listen to many podcasts/ read many books on finances.

I honestly thought my lack of preparedness for managing my financial interests as an adult came from having slightly reckless impoverished parents. But actually I don't see my DCs getting anything better from school.

Even now I'm not sure ds' (at uni) understands the scale of the debt he'll graduate with and what that means. We are working very hard on getting the youngest two to understand the changes on student finance etc.

I knew nothing of investing until maybe two years ago, and had always chosen to buy safe investments such as premium bonds as I was so worried about the mysteries of 'the market'

Yes def

@wanttomarryamillionaire

I’m smiling at your username for this thread!

This sentence interested me:

“It didn't seem to me to be like spending real money.”

This is why I think it’s not as simple as saying “it should be taught in schools”.

What if you HAD learned how to calculate the exact repayment you’d make?
It’s interesting that you choose algebra as the example of not useful maths. Because actually credit card interest is related to algebra! Interest = (balance x interest rate) Then new balance - any repayment x interest rate again…

But back to if you’d been taught now to do it. Would that really have stopped your spending? It doesn’t sound like it. Your spending was because it was too easy, didn’t feel real. Not because you didn’t know it wasn’t your money and would trigger interest.

What if school had taught you about being bankrupt? How would that have taught you any more of a lesson than actually going bankrupt did? And yet as you say - even that wasn’t a deterrent.

As you say - 12 months later you were offered credit again.

I’m not having a go at you by the way… I think your honesty really adds to the discussion.

And it’s why I don’t think, “oh it should be taught in schools” is all of the answer.

You should never have been in a position where you could run up £20K of debt in the first place. You shouldn’t (in my opinion) have been able to write it off.

I often hear my parents’ smugly say that people waited in their day, like they were all morally superior. Honestly, I think it’s because they simply didn’t have the same access to credit.

@Cocomarine i agree I don't think the answer for me would have been as simple as being taught financial planning, but I definitely think it would have helped me and made me think twice about all the credit. I also agree that i shouldn't have had all my debt written off with my bankruptcy. It literally taught me nothing except how to get out of loads of debt quickly and easily! I didn't even have to go in front of the judge! I literally went to the county court with the paperwork, paid the money and after a wait i was given a bankruptcy number to give all the people i owed money to, couple of weeks later had a phone call from the people dealing with my bankruptcy to check I didn't own anything of any value and was then simply told I would be discharged after 12 months! They didn't check my bank accounts or anything else. I was stunned at how easy it all was.

@latetothefisting

Just something I've been pondering. Based on my work experience, and threads on MN, MSE, etc. Is financial literacy particularly poor in the UK, (and apart from my own anecdata, apparently we rank ranks below OECD average www.fincap.org.uk/en/articles/levels-uk) and if so, why and what can we/should we do to improve it?

E.g. there's a thread atm where a poster is asking what the advantages are of using a credit card to book a holiday, something I thought was obvious (greater protection, building credit score, even occasionally cashback) but apparently not. Loads of posters who don't understand their electric and gas bill, why they need to know their standing charge and charge per KWh rather than what the energy company says will be their dd per month (and why that might not be accurate). From work people who don't understand that they have to pay their council tax monthly or upfront, not after the year has ended, or the difference between necessities and luxuries and how to budget for both. From the MSE forums, people who have run up huge debts (and are now, fair play smashing reducing them) because they never knew basics like they had to pay back credit cards, plus interest. Nobody in my workplace understands how our pensions accumulate! And these are all what I would think of as basic things essential for general living, not even going into investments, stocks and shares, crypto and NFTs, compound interest or anything particularly complicated.

Apparently despite being comparatively rich we have one of the worse savings rates (as a percentage of our disposable income) in Europe, by a huge margin.

Not knocking individuals at all - I'm a firm believer of you don't know the things you don't know - and I'm sure there are loads of things I don't know that others would think is basic general knowledge. Just wondering WHY so many people don't know these things - is there a vested interest by the govt in keeping us financially illiterate? And how can we improve things - it's easy to say basic finance should be taught in schools, but what do we remove to make space for it? But if it's not for schools, but for parents to teach their kids, how does that work when the parents don't know themselves?

Financial literacy has never been great amongst the young and poor in the UK. This is why it needs to be taught in school, but not by teachers (many of whom don’t have a clue themselves), it needs to be bank led. HSBC came into a preschool I was at years ago to teach the basics of money management to 3 year olds and it was so engaging. I haven’t seen it offered since.

You can be great at maths but still not be financially intelligent/ healthy. Conversely, you can be poorly educated maths wise but financially savvy.

I really agree with this. I was terrible at maths at school and I'm not particularly confident with numbers even now but I would say I'm reasonably financially literate. By which I mean I'm not brilliant at maths but undetstand the principles of saving up for something rather than putting it on credit, making overpayments on my mortgage, putting extra in my pension, "paying myself first" by transferring money into savings at the start of the month and making do with whatever is left etc.

I don't know where I got this from as money was never discussed at home growing up other than my parents' motto of 'save a bit, spend a bit' but I have learned a lot from MSE and from Mumsnet money/investment forums. I will try to pass on more practical info to my DDs than I received from my parents and hope it stands them in good stead.

"Yes, but in the nicest possible way it’s everybody’s personal responsibility to check what their pension age is now. Everybody knows that the government can change the state pension age, and has done so before."

What's the point if it can change again??
I also explained in my post that I have lived in more than one country so 'my' UK state pension age is not necessarily my retirement age.

"Why do you think you can’t take your 3 overseas pensions until you reach U.K. state retirement age? (be that 68 or whenever)"

I don't have 3 overseas pensions and I didn't say I couldn't take them till UK retirement age.

I have at least 3 UK occupational pensions, worth almost nothing. I was probably talking about them. The age at which I can receive those might not be my retirement age.

I am aware of the current retirement ages in both countries, but that still doesn't mean I know when I will be able to retire as it can change again in the 20 years I've still got to work.

"but never deal with day to day financial/legal issues."

That's not true at all. Pay-day loans is one issue that has been given a lot of coverage in soaps.