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Amid all the excitement about inflation falling and the cautiously optimistic COP28 deal, last week’s report from the OECD into international financial literacy levels unsurprisingly garnered few headlines.
And yet for most people the humble topic of whether they understand inflation, interest and financial risk at a personal level is as powerful an influence on personal wellbeing as any globally dominant news event.
The OECD report, which covered 39 countries, including most of the organisation’s members and a clutch of other G20 and developing nations, reveals some alarming truths. (The UK did not participate but did not say why.) Only 34 per cent of adults across the participating countries met the criteria to be deemed financially literate. Nearly one in six people have been the victim of a financial fraud. And fewer than half (41 per cent) know that crypto is not legal tender.
The study confirms the kind of earlier research that underpinned the Financial Times’s decision three years ago to try to do something about the issue. In September 2021, the board of the FT backed the creation of a charity, the FT Financial Literacy and Inclusion Campaign. FLIC had two priorities: to lobby policymakers to take financial education more seriously, and in the meantime to do our best to educate as many people as possible within the existing system.
For the vast majority of FT readers, understanding the basics of finance is a given. That made it all the more appropriate that we should recognise the gap between the “haves” and “have-nots” of financial understanding.
FLIC is still a very young charity (we turned two and a half last month), but we are extremely ambitious. We want financial education to be a compulsory element of curricula in schools in the UK and around the world.
Over the past year, we believe we were instrumental in getting financial literacy into the mainstream policy debate in the UK, in part via powerful journalism such as Miranda Green’s film on why the UK has a problem with maths. The just-outgone lord mayor of London Nicholas Lyons made the topic a core campaigning issue, and the House of Commons education select committee recently launched an inquiry. Alongside thorough trials of schoolroom lessons, FLIC has produced a suite of punchy social media videos. And among our work for adults, we’ve helped women to think about their financial priorities.
Next year will be a crucial one for us as we take the financial education modules that we have tested and retested in pilot programmes across the UK, and roll them out nationwide. By the end of the year, we aim to have begun the next phase of adapting those materials and striking partnership arrangements with organisations in other countries around the world. Much of the focus in 2024 will be on our UK secondary schools programme. But we will also be radically ramping up the work we have done with low-paid workers, in partnership with employers and unions representing low-paid staff.
The FT has backed us, covering a portion of our operating overheads. But the vast majority of our work has only been possible thanks to the generous donations of FT readers. Our latest funding drive is via an auction of lunches with 19 star FT journalists (plus me!). If you think this would make a good gift for a family or friend, or for yourself, do submit a bid at ft.com/appeal.
Financial literacy as a charitable cause cannot obviously compete with the vital aid campaigns for victims of war or rough sleepers. But it is a crucial issue in its own right — research has shown the wide-ranging societal benefits that go hand in hand with better financial literacy levels. There is a boost to physical and mental health, as stress is reduced. There are economic and productivity pluses, as people escape debt traps or are empowered to invest more effectively or maximise the potential success of their own businesses.
As the OECD said in its report last week: “Individual financial wellbeing [is] the ultimate goal of financial literacy policies and programmes.” Measuring that benefit is hard. But according to its research, there is typically a 10 percentage point uplift in people’s financial wellbeing scores, (against an average of 42 per cent) when their financial literacy scores beat the passmark. (Germany is a standout performer on both counts.)
More research on correlation and causation in these areas is vital, something that FLIC is also keen to prioritise. But in the meantime there is a straightforward maxim: the more you understand about money, the better off your all-round wellbeing is likely to be. Merry Christmas.
Patrick Jenkins is the FT’s deputy editor and chair of FT FLIC