More needs to be done to encourage people of all ages to save for the future and to avoid getting into financial difficulty through inappropriate use of credit cards and loans.

A new report by the Financial Conduct Authority, the City regulator, finds that millions of people are struggling with debt and only a third (35%) of people aged 45 to 54 are preparing for their retirement.

Those are disturbing statistics and will no doubt prompt the FCA to look at the credit industry and whether financial services companies can do more to encourage people to save money.

I hope that does happen; however, I also want to see more done to help people understand how to manage their money. Some initiatives are underway, yet we’re still a long way away from having a complete solution.

Old Mutual Wealth believes part of the reason why people are getting into problems with debt and not saving enough is a lack of financial literacy.

Four years ago, Money Advice Service published the results of a study which concluded that parents’ good and bad money habits have a significant influence over their children’s habits.

The study found that by the age of seven most children have grasped how to recognise the value of money and count it out. They should have also come to understand that money can be exchanged for goods, as well as what it means to earn money and what income is.

STARTING EARLY

Money Advice Service believes parents should include children in discussions about money from age four to give them the best chance of being financially secure in later life.

It conducted some research earlier this year which found that children who weren’t allowed to decide how to spend their own money were substantially less likely to save.

Children aged 12 to 17 whose parents decide how they spend their money were found to be nearly five times more likely to say that borrowing money didn’t bother them.

Old Mutual Wealth’s responsible business director Jane Goodland says she wants the Government to seriously consider introducing financial education onto the primary school curriculum to ‘tackle the epidemic of financial illiteracy which plights families across the country’.

Sixteen savings and investment firms recently launched a project called KickStart Money which is trying to build momentum with introducing financial education into more schools.

Nearly 18,000 primary school children across 100 schools will participate in various initiatives under the KickStart banner to understand personal finance – in particular, understand the consequences of debt as well as the importance of saving and investing for the future.

Such initiatives should be applauded and I hope more children will be able to get involved in the future.

I also hope parents and grandparents take a more active role with developing children’s money habits. Wrappers such as Junior ISAs and Junior SIPPs can play a valuable role in getting young people involved in money matters.

It’s not only about how much money goes into those wrappers; of equal importance is encouraging children to understand how
interest works; so too the stock market, and why developing a regular savings habit is so rewarding. (DC)

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