Is it just me or in the UK there is a lack of financial education which leads to people becoming financially illiterate or is there something else going on?
I've just hit 40 and have taken time to reflect on my financial history. When I was in my teens and early 20s I was irresponsible and would go out drinking, I used to smoke, get take aways etc. I was often in my overdraft and did not have savings or investments.
It was not until my mid 20s that I settled down and matured. I got my own property and cleared my debts. I also built up an emergency fund, pay into a workplace pension and invest in index funds in an ISA and also have some rental properties.
I have noticed that when I have a conversation with others both young and old about finances it is as if I am speaking to them in a foreign language. Shares? Bonds? Index funds? Emergency Fund?
There is also a culture where it is live for today and forget tomorrow. Big cars on tick, big houses, cocktails, fine dining, expensive holidays and designers clothes. People often seem to be competing with each other. I am not saying do not have fun but I get an aura around many in society that they live beyond their means.
I do not recall once being taught about personal finances at school. It was only through my own research later in life that I became more financially literate. When it came to investing for example is was only by reading investment books and watching online videos that I decided using a passive global index fund was the best way for me to invest in equities.
Have a chat to a friend, family, co-worker about index investing and their eyes are likely to glaze over.
Just wondering whether other people agree about a lack of financial education or if there are other factors which lead to many people becoming so financially illiterate?
What are the reasons so many are financially illiterate?
byu/One-Criticism-7648 inpersonalfinance
Posted by One-Criticism-7648
12 Comments
I used to factor intelligence into it but now I think it’s some form of fear people have about actually “growing up” and being a responsible adult. They simply don’t want to pay time to learning simple financial concepts. So it’s a form of chosen ignorance. We have endless information right at our finger tips to guide us on what to do and vice versa, so what excuse is there, really?
Not everyone is interested in investing (as you have experienced) and that is ok.
Live and let live.
Money is a taboo topic in many cultures / countries, because we’ve been told that it’s rude to ask, and it’s pretentious to tell.
I think one part of it is the safety of not adding risk. Outside of bank accounts you always hear about the risk of investments going down…that probably scares someone not financially literate from learning, which would perpetuate the illiteracy. If you learn about smart investing/saving, that gives comfort but I can see people not getting to that point.
Literacy is a poor term for it imo. It’s like physical fitness, some people are really into it and on top of their training and health, a larger share of people are somewhat active but casual about it (folks with a regular savings account or underutilized 401k or whatever), and most people just ignore it outright. Both of these areas take responsibility, some measure of discipline, and take up time and often make us feel bad about our lack of achievement thus far which just turns off the average Joe right from the jump.
If math wasn’t taught in schools, for years and years, most people wouldn’t be able to do any math. I never had one class talk about important life financial topics in grade school or college.
Apples generally do not fall far from trees.
Most parents have poor financial literacy.
Combine that with a general lack of recognition that the existence of the education system does not absolve parents of duties to teach their own children.
Perfect storm to perpetuate financial illiteracy.
One thing to bear in mind is that for many people, investing in stocks and bonds was not easy before online investing became available. So, many people, especially those who are not from the ownership class, did not have access to that type of investing. Additionally, there were high costs often involved in trading or buying investment vehicles.
I’ll add that for older generations in the U.K., consumer credit was not well developed until some time in the mid-1980s. Credit cards were not a thing in the U.K. in the 1970s because of various laws, so people used “hire purchase” for more expensive home upgrades, etc. This overall likely contributed to a lack of generational knowledge-sharing on finances.
I had to take Economics in school but it had nothing to do with practical, day to day stuff. Luckily my parents taught me about debt and credit cards and banking. Now, thanks to YouTube and finance influencers, people aren’t just uninformed, they’re misinformed.
Financial illiteracy is the default.
I learned the basics from my parents’ behavior and helping my mom when she paid the bills.
Consumerism and ‘keeping up with the Jones family’ was still a thing back then, but my family didn’t have a lot. One car, one tv. No ‘refreshing’ the house/furnishings unless something was unrepairable. Car vacations, mostly, one plane trip to Florida a year. Their savings credit card was used only so you didn’t have to carry cash for shopping, and paid off in full every month. It was a frugal lifestyle that imprinted on me.
Their savings were in bank accounts, only my dad’s 401k was in the stock market. When I got my first real job, I needed to teach myself about mutual funds.
I know some of my friends likely fund their fancy-schmancy lives with CC debt. And too many women – even in this day – have ‘no idea’ about the family finances.
So yeah, if you’ve read this far, it started with ten-year-old me putting stamps on the bill payment envelopes for my mom
Short-sightedness and a lack of impulse control. Whether that’s a matter of nature or nurture I’m not sure.