Financial sophistication and intensity of transactions are things which have grown exponentially in this world of rapid advancements however, the every-day financial capability still remains a dubious skill to date. In order to make the term more clear, the concept of financial capability means “the ability to manage money well day to day, dealing with the financial crisis and managing life events”.
It is observed that there is an increasing gap between people who show exceptional financial sophistication and the ones who need strong support to sail through basic financial dealings. The former is familiar with financial instruments, such as re-mortgaging, pension funds, SIPs, equity and much more, while the latter struggle with, and fall prey to risky online options, Payday lenders and indulge in transactions without completely going through the terms and conditions.
According to a survey conducted by future finance, 31 per cent of students were actively using credit cards and payday loans to cover their study and university costs. Shockingly, another research conducted by London Institute of Banking and Finance illustrated that almost 60% of students, aged between 15 & 18 did not have any kind of formal financial education, resulting in poor financial management and student debt. To make it more clear, figures released by financial capability strategy for the UK unveil the alarming state of financial capability in the nation;
- 12 Million people have no plans and are not saving enough for their retirement.
- Almost 30 Million people have zero or very little savings buffer to help them in case of an income breakdown.
- 22 Million do not have a basic £500 in their savings account to replace some of the basic amenities, like a fridge or a TV.
- Around 8 million people are trapped in serious debt, and what shocks us the most is that only one in 8 are seeking help.
One thing that we would want to shed some light upon, the above-mentioned figures do not just expose the financial capabilities of the population, but they also represents the long-standing struggle of UK’s with poverty, rising inequality and lack of proper financial education.
In a nutshell, better finance education to the current generation, transparency in finance and enhanced circulation of relevant information by government, about its schemes and support will help in enhancing the current status of financial capability in the UK.