21 August 2014
The speakers collectively provided key insights into and discussion of the activities provided by leading organisations in promoting financial literacy and capability and evidence from recent empirical research on the impact of financial knowledge and understanding on financial behaviour.
Alison Pask (Vice Principal Financial Capability, ifs University College), posed the question: why do young people need to be financially confident and competent, and how is the education landscape changing in order to achieve this? Veda Harrison (Sustainability Programmes Manager, Royal Bank of Scotland) followed with an insight into the work of the Royal Bank of Scotland’s MoneySense Programme.
James Devlin (Professor of Financial Decision Making, University of Nottingham) presented evidence from the Centre for Risk, Banking and Financial Services research programme on consumer knowledge and confidence in financial services. The final presentation, by Jessie Kai Ling Sim (Research Fellow, Centre on Household Assets and Savings Management (CHASM), University of Birmingham), focused on the measurement of financial literacy using evidence from a study of 15 year-olds in Oxfordshire and Greater London.
What was apparent from the talks is the range of work undertaken in this area and the recognition of importance of developing and sustaining financial capability throughout the life-course.
By the end of the day, two key themes emerged around the questions of how to effectively develop financial knowledge and capability among individuals, not just among the young, but throughout life, and how to effectively measure and ascertain the impact of financial knowledge and capability on subsequent financial behaviour. It seemed that on balance more work had been undertaken on the promotion of financial literacy, whereas there is a need for more work that focuses on establishing the impact of various interventions aimed at increased financial understanding and capacity.
The presentations revealed that development of financial literacy and capability is subject to a range of external forces. With regards to political forces, Alison’s talk highlighted the impact of recent initiatives regarding curriculum scope in schools. Veda pointed to economic forces brought to the fore by the credit crisis and its aftermath. James’s and Jessie’s presentations both noted the impact of social forces on different consumer groups and the influence of social norms and cultural values around money. The presentations also touched on the impact of technology in conjunction with invisible money and frictionless payments. The role of technology in building capacity and aiding decision-making will form the subject of a future seminar in this series. The presentations did not explicitly touch on the regulatory influences, but these will feature in the next seminar on financial advice and guidance.
In addition to the impact of external influences, the presentations also highlighted the influence of individual differences, such as age and gender, attitudes and confidence – on financial literacy and capability. James's research highlighted differences in perceived (subjective) and actual (objective) knowledge and gender on financial behaviour and the difficulties of persuading some adults that they need to develop or enhance their financial knowledge and be aware of their financial decision making blind-spots.
In terms of the impact of financial literacy interventions, Veda’s presentation noted the need for more work to understand what the impacts are, on whom and to what effect. The discussion from participants underscored the complexity of measuring and mapping consumer attitudes and behaviours in this area which in turn links into how we evaluate the impact of any intervention. Jessie’s work highlighted the challenge of developing an instrument to measure financial literacy amongst a vulnerable group of young individuals. The notion that there could be or should be a golden measure of financial literacy whilst seductive is ethically fraught, particularly when considering the current regime of educational metrics.
The seminar provided much food for thought for ongoing research in this area. The theme of financial literacy and capacity will be a key thread running through the subsequent seminars as we explore the interactions between financial literacy and financial advice and technology use.