A majority of young people enter adulthood ‘financially illiterate’, suggesting they are poorly equipped to make good financial decisions in later life according to new research from Compare the Market and MyBnk.
The research suggests that 3.4 hours of financial education each month could significantly boost financial literacy for young people in the UK.
Almost two-thirds (61%) of young adults do not recall receiving any financial education at school, compared to under a third (29%) who do remember receiving financial education. On average, those who did receive financial education lessons were taught for approximately only 48 minutes per month, or only 11 minutes per week.
While financial education is on the curriculum for UK secondary schools, with 78% of teachers surveyed stating that financial education lessons are being delivered in schools and 81% stating these were mandatory, in England, 80% of schools are academies or free schools, which means they can opt out of providing financial education.
To understand the quality of financial education provided in secondary schools, the research also examines the financial literacy of young people, using the Compare the Market and MyBnk Financial Education (FinEd) measure . The research found that only two in five young adults (41%) in the UK are financially literate.
For those who did not receive financial education at secondary school but were classified as financially literate, nearly two-thirds (63%) stated they received financial education from parents or carers, showing that financial education should not merely be confined to the classroom and that there is a role for parents, carers, businesses, and the wider community.
The findings suggest a statistically significant positive association between the average hours spent on financial education in school per week and financial literacy. An increase in financial education would enable a greater number of people to better manage their day-to-day spending and financial affairs, which in turn could positively impact the UK economy.
Increasing the share of financially literate individuals by a single percentage point, equivalent to approximately 55,000 young adults, requires, on average, a 24% increase in the average hours per week spent on financial education, or approximately 12 minutes per month .
To ensure that at least a majority of young people can be classified as financially literate, this research suggests that an increase of 44% in current literacy levels would be required, which in turn requires at least 3.4 hours per month of financial education for 11- to 18-year-olds.
It’s well known that secondary schools are constrained by competing demands on teacher time and may lack expertise on the subject of financial education. Of those teachers who said that financial education is being delivered in their school, eight in ten (80%) stated that they were personally responsible for preparing and collecting materials.
Teachers believe 12 days is sufficient to train up and be able to deliver financial education content. In addition, teachers believe that, on average, 82 minutes is needed to prepare the material for an hour-long financial education lesson.
Amongst teachers who stated that more time would be beneficial to ensure that financial education is delivered at their school, either via more time being reserved in the school day for students to receive financial education, or more time ringfenced for teachers to prepare, plan and/or deliver financial education, the majority (57%) believe that making more efficient use of the school day is the best way to find additional time. Examples include using evidenced quality resources, bringing in external resourcing such as financial education charities, or having dedicated internal resourcing.
Mark Bailie, CEO, Compare the Market said “Everyday life is full of financial decisions, and many of these can be overwhelming if you don’t have the tools to help you secure the best outcome for yourself.”
“We know that most people leave school with an inadequate grasp of basic finance. This lack of financial confidence and understanding can have a real impact on their adult lives, limiting the choices of financial products available to them and with the potential to significantly increase the amount they pay throughout their lives.”
“At Compare the Market, we’re passionate about helping people save money and get great deals on their household bills. That’s why we are partnering with MyBnk to help more young people get better access to high-quality financial education, removing financial stress and helping them gain the skills they need to manage money in a cost-effective way.”
“It’s clear that young adults at the start of their financial lives are bearing the brunt of inflation and the cost-of-living crisis. That’s why we will continue to support MyBnk and work with policymakers, businesses, households, and schools to think seriously about how we, as a society, can improve financial understanding.”
Leon Ward, CEO, MyBnk said “This research shows that two-fifths of 18–24-year-olds are not financially literate, a number that is deeply concerning, especially given the current economic crisis and its impacts on wellbeing. Wider research shows that rising costs are the major worry for over half (56%) of young people , who reported it caused disruption to daily life, particularly their diet and sleep – two cornerstones of good health and wellbeing. Improving the financial capability of young people can help them cope with this situation, and prevent serious future problems, including poor mental health, unemployment, and homelessness.”
“Despite our research showing the need for financial education, we recognise the pressures and constraints teachers are under. That’s why we strongly encourage the government, schools, businesses, and households to take advantage of external resourcing from organisations like MyBnk. MyBnk’s financial education experts and resources save teachers the time needed to train themselves, prepare the content and deliver impactful lessons.”
“Given the combined economic and health benefits that financial education can provide, MyBnk remains committed to providing programmes across the country and calling for further prioritisation of this critical issue. Preparing children and young people to be financially confident and capable as they enter adulthood will provide rewards for us all.”