In a recent blog we reflected on the fact that the UK struggles with financial literacy – across all generations, and in all sections of society.
In fact, studies show that almost three-quarters of British people find it hard to get their minds around money matters. In turn, that leaves individuals’ wealth at risk of being badly invested or simply frittered away if people can’t or won’t seek the right financial advice.
It seems like the public is coming round to the need for better financial literacy. According to a recent report about the current school curriculum by the Laidlaw Foundation – flagged up in The Times – 94% of parents believe educators have a key role to play in helping children learn life skills, not least managing their finances.
In addition, 40% of parents named financial literacy as the most important life skill – and almost twice as many said such skills are more important to their child’s future compared to preparing them for further academic study (i.e. further and higher education).
There’s lots of work to do to chip away at the causes of poor financial literacy in the UK – and it’s our mission to do just that. Nor does the job stop when school’s out; adults still need support managing their finances.
To that end, Prajesh Patel – ADL Wealth Director, Private Clients – was invited to run a series of online seminars with an audience of university graduates working at law firm Fieldfisher. The sessions covered a wide range of topics, from creating an ‘emergency fund’ and budgeting, to setting goals, investing and thinking differently about credit.
We asked Prajesh to discuss his experience of helping these young people to improve their financial literacy and wealth management – and discovered he also learned a lot from the three sessions.
Which areas of finance that you covered seemed to be of most interest to the graduates?
I received the most questions around credit cards and credit scores. Credit and debt management is an area I might have learned about earlier. That was the overall theme of the seminars: what I wish I’d known when I left university.
Information around this is relatively scarce, and in some cases, confusing to understand. Credit also comes with a stigma attached. It’s seen in some quarters as simply building up debt, and therefore problems for the future.
But I think it’s one of the critical areas of financial literacy and wealth management. When the graduates come to apply for a mortgage, or in some cases a loan, they will need a credit rating. There’s no difference between using your current account or having a 0% interest credit card to pay daily outgoings – like shopping or bills – and getting used to paying it off automatically each month.
As long as you budget properly, and it doesn’t spiral out of control, you’ll also get a good credit rating, which will help in the future.
Were there any other surprises in the audience’s response to the topics you discussed?
There were only a few questions about investing. That surprised me. Perhaps the audience has a good understanding of it already. There’s a lot of information available in this area so self-teaching is easier than, say, for credit and debt.
But it’s still important to remember that some of the information is bad advice. Look at the number of property investment courses that have sprung up in recent years. Some of those, when scrutinised properly, are not going to make people as wealthy as fast as they claim.
Then there’s the interest in cryptocurrency investment returns among younger age groups in particular. That’s still a relatively unregulated market and you should definitely do due diligence and seek advice before committing money to it.
Was this the first time most or all of the graduates had interacted with a financial adviser?
Yes, that was one of my key insights from the seminars. It seems I was the first person attempting to give them the tools they need to navigate a complex financial world.
I think there are three reasons for this. One, regulated advice is rarely available on social media where this audience goes for a lot of its information. Two, their parents may also not have accessed financial advice, so the knowledge they can pass on is limited.
And three, it’s easy to think when you just have a couple of hundred pounds of spare cash per month that a wealth manager wouldn’t be interested in talking to you. But we’re always happy to help! Especially if it means you don’t fall into the pitfalls of bad investment choices, which I covered earlier.
You mention finding financial content on social media. Do you think technology can help improve financial literacy for the graduates’ generation and those that follow?
Some people will always be better than others at using tech and finding reliable sources, no matter their age. But I do think young people today have a better chance to get the knowledge they need, because they are more proficient with technology, and have instant access to so much information.
There are lots of financial advice apps out there – ADL’s My Finances for one – and they’re usually pretty good. Hopefully technology will have an impact on financial literacy in the future, too.
Did you leave the graduates with some sage advice about what they can do to improve their financial situation from now on?
I think it’s a case of building their knowledge of financial matters gradually. Pick an area, read up on it and seek advice where necessary. Based on their feedback about the seminars, which was overwhelmingly positive, there’s clearly a demand for better financial education so that’s a drum ADL will continue to beat.
Here’s a summary of what graduates can do – though most of these are also applicable to all of us:
- Structure your financial goals: find out more here
- Use (and regularly pay off) a credit card to build your credit score
- Budget well by using an app to help you
- Build an emergency fund before you invest
- When you decide to invest – diversify
- Make sure you use tax wrappers e.g. ISA/pensions
- Pay off your student loan as early as possible
To find out more contact ADL using the form below. You can also keep track of Prajesh’s advice on learning how to manage your finances on social media: