Collaborating to improve financial capability in the UK
16 September 2014
‘In the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed.’
The financial capability sector has been working on a strategy to improve financial capability in the UK. This may sound far-removed and rather technical, but with millions of people in the UK struggling to manage their money, it’s much closer to home than you might think. The effects of a lack of financial understanding are not only financial but may lead to wider problems for individuals, including higher stress and reduced quality of life.
Many organisations have been trying for some time to help people deal with their money matters. Financial education has been added to the school curriculum, banks and trusts and foundations are funding major work in this area, and small charities are searching for better ways to help. However, in recent years it seems this support has not always translated across—faced with tough economic times, 17 million people run out of money before payday.
It is in the interest of all these different stakeholders to find out which financial capability interventions (outcomes) actually work. And so the Money Advice Service, which is leading the development of the strategy, commissioned NPC to develop an outcomes framework based on research and consultation with sector experts.
Compared to other sectors, there is a large amount of evidence from across the world in this area. We’ve added considerable evidence to this about what doesn’t work, in an attempt to weed out those wasted opportunities. The body of research now tells us, therefore, that we need to include parents in financial education, rather than having it done entirely at school, and that debt advice works, so we need to help people access it earlier.
But of course all this is rendered worthless if not acted upon. It is therefore heartening to see effective practice at the heart of the financial capability strategy, and to see a sector come together to produce a framework for deciding what their outcomes should be, so that they can work towards them in a targeted manner. We found a number of evidence gaps in the process—but with better, and shared, measurement the sector can begin to know how effective these interventions are.
Over time we hope that the sector tilts towards more effective practices. A strategy built on collaboration and evidence should allow the sector to meet its goals. And, in turn, this should help people to reach their own financial goals.
The financial capability strategy is now out for consultation. You can read more about it and respond to the consultation here.