Ollie Smith: Last week, I wrote a column about financial education and the struggle for financial literacy. I’m keen to know more about why people find managing money so hard. So, to do that, I have enlisted the help of Abi Collier from Octopus MoneyCoach for a mini two-part video on just that topic.
So, Abi, thanks so much for joining me today. What do we know about financial literacy in the U.K.?
Abi Collier: Thank you so much for having me. So, money is actually the number one stressor in the U.K., with over 75% of people having difficulty focusing at work, because they’re just so worried about it. And 83% of people think about money at least once a week as well. So, it’s definitely hot on our mind.
OS: Sure. Would it be safe to say large numbers of people struggling with that is partly a failure of the education system and schooling and the curriculum?
AC: Yeah, absolutely. We’re not taught at all at school. We’re just sort of sent off into the adult world expected to know how to manage our own money. And also, if you don’t have sort of the parents at home or any other sort of older people to look up to in terms of money that will discuss it with you, you’re, kind of, left in the dark. You’ve got no one to help you with it.
OS: I just want to throw a little curveball question here, which is about sort of household management, because I think without wanting to sound sort of too home economicsie, I think there’s a big thing here about not just being in control of your own money, but actually managing a whole household, which is a completely different set of responsibilities about budgeting, your bills, the providers of services and utilities, and immediately just saying that it feels so much bigger than just being in charge of one bank account, and that’s because that is big. So, what do you reckon about that? Is that something that needs to be taught more?
AC: Yeah, absolutely. I think even knowing things like how to get a mortgage if you want to buy your first home, again, we’re not taught that. We’re just expected to know. Things like how to find cheaper bill providers, again, you’re just expected to know how to find it, and knowing that you can change your bill provider as well is such a thing that people don’t know about. So, I definitely think an overall change in the curriculum around money could be really helpful for almost everyone in the country.
OS: We’ll come onto the tips and tricks of how to do that in the next video, I hope. But my final question is really about sort of DIY investing really and the challenge of, kind of, breeding a generation of shareholders and confident investors. Given that people struggle so much with the basics of finance, I just wonder if investing is actually too big a goal to ask of some people at the moment, and that really, we need to go back to basics. Would you agree in any way?
AC: I think it’s a bit of a journey and that definitely plays a part in the journey, but it’s definitely not where I think you should be starting. It’s all about learning to manage your money first, budgeting, actually putting some money away into savings that isn’t an investment first of all, so you can get your (indiscernible). And then, possibly, at that point, we sort of built up the confidence then to look into investing. But right now, I think, if you can’t manage your own money, then maybe look at doing that first and then look to move on to that afterwards.
OS: Awesome. Okay. So, that’s some of the basics covered off. Next time, I’ll be asking Abi all about basic steps for people who struggle with money so that they can come become more engaged with their cash.
Until then, I’m Ollie Smith, UK Editor for Morningstar.