David Harrison, managing partner at financial services firm True Potential LLP, comments on the savings gap in the UK and the current barriers to saving.
Investing and finance is potentially a very simple-to-understand subject that is frequently made complex. We recently conducted a survey of over 2,000 members of the British public about their savings and debt habits. Just 17 per cent feel they have enough knowledge to manage their personal finances alone. Add to this the fact that over half are not confident that they will save enough to live comfortably in retirement and 29 per cent admit that they are currently saving nothing for life after work, and it’s clear to see a growing savings time bomb.
One step that could be taken towards closing the current savings gap that exists in the UK would be to improve financial education and make it more accessible.
Recognising that the British government has recently announced that financial literacy will be taught in schools starting September 2014, it will take some time for the benefits of this initiative to be seen. We need to educate all those who have little understanding of how to manage their personal finance now.
A lack of financial education is highlighted by the fact that according to our recent survey, 15 per cent of people are choosing to save in cash either in a high street savings account or a cash ISA, despite the poor rates of interest. Just two per cent are placing their funds in products that consistently beat inflation, meaning most savers are adding no significant value to their investment.
This need for education is a key reason why True Potential has partnered with the Open University Business School to form the True Potential Centre for the Public Understanding of Finance (PUFin).
Informational blogs and research are available now while free modules will be available to the UK public starting in Spring 2014. Topics for these modules will include such things as household budgeting, borrowing and debt management, savings and investments, understanding risk and consumer rights.
One of the main goals of the Centre is to democratise savings and make financial education more accessible. Financial products are currently often difficult to understand than necessary and with the rise of the payday loan industry, it has never been more important to know what you are signing up for.
The free modules offered by PUFin will arm people with the knowledge and information they need to make informed decisions about their finances, or to ask the right questions of the right people. This will inevitably go a long way in helping to close the growing savings gap, however there is still much more to be done.