Table of Contents
- Only 32% feel confident when managing their money.
- Most people never received financial education in school.
- Upcoming review of guideline and advice limits could be ‘revolutionary’
According to one study, two-thirds of Britons lose an average of £65,000 over their lifetime due to low financial knowledge and confidence.
Only 32 per cent feel confident managing their money, new figures from digital wealth manager Moneybox suggest.
Additionally, 64 percent believe they have missed financial opportunities in life due to their lack of knowledge and confidence in money.
Worse situation: Two thirds of UK adults are £65,000 worse off on average due to low
If these people were better supported to make financial decisions with greater confidence, Moneybox suggests this could equate to £2 trillion of potential purchasing power for the UK economy.
Research reveals that people who are more financially confident have higher net worth, even when adjusted for income, to the tune of £84,000.
What’s behind this?
Most people in Britain have never received financial education at school, so they have had to figure out how to manage their finances and plan for the future through a process of trial and error, unless they can afford regulated financial advice. .
It has created a financial confidence gap, meaning many people are missing out on the ability to grow their money long-term in the best way for their circumstances.
Data shows that financially confident people save and invest more money more consistently.
For example, 70 percent of those who feel secure save monthly and represent 96 percent of monthly savers. They save £129 more a month than those who don’t have confidence.
They are also investing 68 per cent more per month than those who lack confidence, at an average of £1,300 more per year.
This financial confidence gap has a huge impact on the UK’s wealth.
The average net worth of those with low levels of financial confidence is £58,000 behind those who feel more secure (£114,000 compared to £172,000), equating to a £1.3 trillion gap across the board. the United Kingdom.
This gap grows even larger for people who have no confidence at all, with the gap stretching to £84,000 behind that of a UK adult with some level of confidence (£60,000 compared to £143,000).
While friends and family are often credited with where people learned to manage their money and plan for the future, those who rely solely on personal relationships to guide them in financial matters were found to be at nearly 30 percent worse than average. .
New research from Lloyds Bank shows that the main financial role model for 18-25 year olds is the father, with 42 per cent turning to their parents for help with money.
A third of this group discourages investing because they don’t feel they know enough to get started.
Closing the £2 trillion gap
The FCA and Treasury have been working on proposals to close the advice gap in the form of the Advice Guidance Boundaries Review.
The proposal of most interest to the FCA and industry groups is the targeted support proposal – a new approach that would allow firms to provide tailored support to groups of people in similar circumstances.
It would allow companies to use limited data they have on people to suggest products or courses of action.
A person could be identified as belonging to a target market and the company could suggest options based on “people like you.”
For example, a customer who has a sum of money in their bank account that meets the company’s definition of excess cash.
The company could highlight that its money would be better able to combat inflation if it was invested and suggested products that aligned with customers’ needs.
Exactly what data would be used to establish what “people like you” means has not yet been established.
A policy document detailing the proposals was published in December and the FCA is seeking responses to the document by February 28.
Brian Byrnes, head of personal finance at Moneybox, says: “Most probably haven’t heard of the upcoming Guidance and Advice Boundaries Review, but it could be game-changing for consumers’ finances.
‘It represents a crucial moment; The UK financial ecosystem has a collective opportunity to reshape the way the British public is supported in navigating the complexities of personal finance, filtering available information streams, cutting through unhelpful noise and helping people make decisions. finances with more confidence. .