Increasing the financial skills of the UK's 18-40 year olds is essential if they are to meet the greater demands placed on them and avoid problems in the future, the Financial Services Authority (FSA) said today as it launched a programme to help more than 10 million people over the next five years.
The need is highlighted in an FSA survey. Establishing a Baseline, also published today. This has been conducted to create a comprehensive picture of financial capability in the UK and is the largest survey of its kind in the world.
The survey, conducted by the Personal Finance Research Centre, at Bristol University shows that even after lower incomes and limited experience are taken into account, those in the 18-40 age group are less financially capable than their elders. Yet it is this group that today faces greater individual financial responsibilities.
John Tiner, Chief Executive of the FSA said: "There is an urgent need to help the young. The ability to manage money grows with age and experience. But rapidly changing economic and social trends mean that today's 18 – 40 year olds are faced with greater challenges than were faced by their parents. They have greater access to credit and are becoming consumers at an earlier age. On top of that, the costs of higher education and of retirement are being increasingly borne by individuals rather than the state or employers. This combination of pressures means that the cost of not having the necessary skills to make sound financial decisions is becoming increasingly significant."
Elaine Kempson, Professor of Personal Finance & Social Policy Research in the Personal Finance Research Centre at Bristol University, said: "It is extremely important for us to understand people's levels of financial capability. The personal finance world is so complex. Until now we have been working in the dark on this subject, not fully understanding what people could or couldn't do and importantly who was having problems.
"This survey meets that need and is without doubt one of the most rigorous and comprehensive surveys I have worked on in the 20 years that I have been involved in social policy research. It is a credit to the FSA that they made it possible."
The FSA today published a seven-point programme setting out how the National Strategy for Financial Capability will help address this challenge. This will see financial education, information and advice reaching further into UK schools, universities and colleges, the workplace and organisations that help young, and often excluded, adults.
John Tiner said: "Improving financial capability is a long-term challenge. Having evaluated what works, we are now at a turning point where the FSA and a wide range of partners are moving to national implementation to the benefit of millions.
"We are determined to maintain the momentum. Financial issues run through every aspect of life and we encourage other organisations to think about how they too can work in this partnership to help people, particularly the young or the vulnerable, to become more financially confident and capable."
Clive Briault, the FSA's managing director, retail markets, will set out further details of the planned programme later today (March 28) and will explain how this strategy integrates with the FSA's other work to improve consumer protection.
Speaking at a conference with its industry supporters, he will say: "Our work on financial capability is part of a broader picture designed to help consumers achieve a fair deal. It is complemented by our requirements on firms to provide clear information so that consumers can engage with the financial services market, make informed decisions and shop around; the need for firms to treat their customers fairly; and by our risk-based supervision of individual firms and our thematic work on particular risks and product types."