According to new research conducted in the United States by the Financial Industry Regulatory Authority (FIRA), 63% of adult Americans are ‘financially illiterate.’ The report goes on to say that this means that 63% of adult Americans are unable, amongst other things, to ‘reconcile their bank accounts, pay their bills on time, pay off debt and plan for the future.’
If a similar report had shown that 63% of adult Americans were illiterate or innumerate, I reckon something pretty drastic would be done about it at once, but because there is no easy solution to hand, the problem remains unsolved.
Financial literacy in the UK
What would a similar survey reveal in the UK? There are lots of indicators, from a wide variety of sources, that things are no better here than they are in the USA, indeed one survey by the Institute for Education (IOE) claims we ‘suffer from one of the lowest levels of financial literacy.’ In its survey earlier this year, conducted with Cambridge University, the IOE said that one in three adults in the UK ‘cannot work out the correct change from a shopping trip’.
Both the IOE survey and the FIRA survey suffer from one common flaw, and that is that they take too narrow a view of financial literacy. The FIRA survey seems to have missed the fact that millions of Americans simply cannot afford to pay their bills on time, or reduce their debts, because they live on credit as their wages have not risen in real terms since the 1970s. This means that the purchasing power of most Americans is about the same as it was forty years ago.
Financial education needs to improve in school
Access to credit was once for a small number of relatively well off people. It is now made available to almost anyone – often at usurious rates of interest – and yet we still don’t educate our young people at school about this massive topic which will impact on every single one of them at sometime in their lives, often with disastrous consequences.
As a society, we need to look at financial literacy in a much broader way. Here at Keep The Cash, we already do because working with thousands of school students and their teachers (and parents) has taught us that the key topics of employment, finance, property and being a tax paying citizen cannot be disaggregated. Each one of these topics makes up the body of skills and knowledge that everyone of us must have in order to build a sustainable, solvent and independent adult life. There is much more to financial literacy than being able to count one’s change.