New research reveals that one in three of us can’t figure out the correct change from a typical ‘big shop’. This poses the question as to whether the UK should be investing in its financial literacy problem
Whilst the UK might still be a major player on the global stage, despite both its relatively small size and whatever you might think of Brexit, we are facing a crisis when it comes to adult financial literacy.
England and Northern Ireland both rank as two of the worst global performers on everyday numeracy tasks. Researchers from UCL and the University of Cambridge found that a third of UK shoppers aged between 16 and 65 couldn’t work out their change after a shopping trip. Almost half also couldn’t apply a simple discount to their shopping and more than half were unable to interpret a basic graph displaying financial information. In the study, the UK ranked 27th, with Japan, Singapore and South Korea the top three performing countries and the US ranking 19th.
There is a direct correlation between those with basic financial skills and the ability to make important financial decisions such as buying the right house at the right time and making wise investments. Which means we are currently facing a potential crisis.
Why?
So, why are we so financially illiterate? Is it because too many of us are relying on our phones to do our basic mathematics for us? Or is it a more fundamental problem with our educational system? The UK has rarely come out on to when it comes to math skills, but the questions asked in the study were incredibly basic, to the extent that in years past, a 12-year-old would have been expected to answer them correctly with no help. Financial literacy is about more than just maths though and these figures prove that financial education should be a vital component of education going forward.
The solutions
Real-world maths – One of the proposed ideas for a long term solution from the professors who undertook the study was to invest more heavily in financial education at every level – at schools at university and even in the workplace. This should involve maths education that utilises real-world examples instead of abstract theory.
Adult education – Adult numeracy is just as important as child numeracy, as most adults in the UK currently have the kind of numeracy levels that would traditionally be expected of primary school children. Numbers are a major part of our everyday lives and whilst it could be argued that you can quite easily boot up a calculator on your phone to answer a question – without context if you don’t know how that equation works then you are still liable to make a mistake. Thankfully, all adults can sign up for free maths qualifications that include financial calculations and last year alone more than half a million of us signed up to these courses.
Clear costs – Of course, educational reform is going to take time, but in the short term it should be up to financial companies and organisations of all sizes to make it more clear how much things are actually going to cost. This not only in the interests of the consumers but of the companies themselves, as it will cut down significantly on the resources wasted on correcting mistakes.
If the above solutions are utilised properly then we could theoretically be poised to enter a golden age of financial enlightenment, where wealth management is reasonable and considered and less of us end up in debts that we might never be able to claw back from. Financial literacy is important because it filters into every decision we make involving money, be is saving for our retirement, electing the right insurance or even using our credit cards.
A more financially literate society is a wealthier, healthier and happier society, and in times of turmoil, we could all use a little more of that!
