Financial literacy push

Over the past few months the UK’s Competition and Markets Authority has overseen a major revamp of its protection powers. The increased focus on consumer rights is something that is increasingly prevalent in Ireland, too, with campaigns to enhance awareness of the dangers of investment and money fraud scams.

These protections are welcome regulatory interventions. What they acknowledge is the growing number of attempts stemming from bad actors coming up with too-good-to-be-true investments, or mis-selling by over-eager financial institutions.

Information gap

There is plenty of evidence that people are falling for these scams and being directed into products that are not suitable for their risk appetite. Putting in place extra safeguards is the correct thing to do, and so is closing the information gap. We also need to look at a more fundamental issue when it comes to money: we rarely discuss it and sometimes to our detriment. Culturally, it seems to remain a taboo subject to talk about among family and friends.

Autumn marks the restart for school and university terms. Over the course of years and years of education we teach kids and young adults many different skills. We can quote sonnets in our mid-teens, but I doubt many can work out compound interest.

The complexities of managing our own personal finances are being changed by technology. We can bank and make payments electronically instantly. You can apply and be approved for a mortgage without setting foot in a bank branch. These are wonderful changes that speed things up and have taken some layers of difficulty out. What we haven’t been so good at is giving individuals the knowledge they need to make decisions in their best interests.

Knowledge boost

I’ve been immensely impressed with the Department of Finance’s recent initiative to develop Ireland’s first National Financial Literacy Strategy to boost education and knowledge. The final outcome is a few months away but it is refreshing to see the conversation finally take place. It follows research carried out by the Competition and Consumer Protection Commission, which points to a link between those with lower incomes and education attainment being more likely to struggle to manage a personal budget.

That lack of knowledge about how to manage money and how basic financial products work often comes at a cost. Far more common than people wilfully reneging on loans are those who get into financial difficulty and are embarrassed and unable to articulate their problems, according to debt charities and personal insolvency practitioners.

Digitalisation danger

Mortgages are the biggest financial commitment most of us will enter into in our lifetimes, yet few of us would be able to calculate changes to interest rates off the tops of our heads. The great change that increased digitalisation brings to managing money also brings with it dangers, by pushing those on limited income and education further to the margins and in the sights of those who want to take advantage of those vulnerabilities.

We do not need to turn everyone into an economist or qualified financial adviser but we do need to start teaching the basic concepts of managing personal finances and of how to understand money. And this should start in school for teenagers, even for a couple of hours every term.

Financial literacy is something we should have addressed long ago. As with so many issues, education will change life for the better and we should be developing programmes to give as many young people as we can the skills they need to make better financial choices.