It’s possible that at some point you may have heard the term ‘financial education’. It refers to the idea of being literate in monetary-related matters so as to make informed decisions regarding one’s finances. In other words, knowing what to do with your hard-earned cash.
Perhaps once a subject reserved only for those working in financial circles, nowadays it pays (literally) to educate ourselves on how to make the best use of our income. As the old saying goes, look after the pennies etc. etc. However, financial literacy isn’t just about how to save more; it can also encompass subjects like dealing with debt and improving your credit score.
Health and the M word
Figures released last year by the Money and Pensions Service (MaPS) highlighted that money is the primary source of stress among adults, with 63% feeling anxious when it comes to their finances. The data also revealed that, on average, people struggle with money for two years before asking for help.
This isn’t a problem linked exclusively to those on lower incomes, though. Recent research released last month from Aegon suggests that anxiety linked to money persists even for those on larger salaries, with one in three top earners stressed about their finances. It also highlighted that worries about mortgage repayments, credit cards and retiring actually increase with higher incomes.
The Covid-19 pandemic has made the last year particularly challenging for many of us with lockdowns, furloughing and even redundancy. As of February 2021, there was £1698.4 billion of debt owed by people in the UK, an increase of £15 billion on the same time last year pre-pandemic. This equates to an extra £286 per adult over the previous 12 months.
As with all types of stress, pressure over our finances can have a direct impact on our health. It’s been reported that in England alone, over 1.5 million people are suffering with debt and mental health problems. Often a difficult cycle to get out of, one can intrinsically affect the other.
Housing market struggles
And it isn’t just debt that is affecting the nation. There has been an average increase of 8.6% in first-time buyer house prices in the year to February 2021, with a 1.3% increase in private rental costs. Saving for a purchase as big as a new home, or budgeting for an increase in rent, is no easy feat, especially in a market as changeable as that of housing.
With 20% of people struggling to pay essential bills, the desire to move house can feel like a distant dream for some once deposits, stamp duty and fees are taken into consideration.
Breaking the money-stress cycle and embracing financial wellbeing
So, what can be gained by improving financial education?
There is a stigma surrounding debt which may make it harder for employees to reach out for help. Supporting your team with fiscal literacy resources and training could make a big difference to them, with a positive outcome for the company as a whole. You may find your workforce to be more engaged, happier and to have an increased loyalty to the business if they feel supported in their financial education journey.
Aegon’s study also revealed that having a more definitive picture of where we see ourselves in the future leads to a lower debt-to-income ratio. Only 4% of those surveyed with a vague idea of their future have thought about how to achieve their financial goals, compared to 33% who have a specific picture of their future self. Being empowered with the knowledge and tools on how to make our income and savings work harder may help your people to map out a plan and visualise what they want from their future. With all this in mind, education and improved literacy in all things finance could be a truly valuable benefit for employers to offer in aiding the financial (and non-financial) wellbeing of its people.