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Peer2Peer Finance News | August 23, 2019

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Dearth of financial education leaves investors unprepared

Dearth of financial education leaves investors unprepared
Suzie Neuwirth

98 PER CENT of retail investors believe they left school with insufficient understanding of finance, with two thirds saying they would have made better decisions if they had exposure to financial education in school.

Research from The Share Centre, released on Monday, found that just three per cent believe they acquired enough knowledge about finance at university, with more than 70 per cent of investors teaching themselves about finance.

“This data portrays how unprepared young people are for making financial decisions in life after education,” said the stockbroker.

“What is particularly concerning is that in this day and age, for those young people seeking higher education, they will be faced with vast amounts of debt which will inevitably be a financial strain to them in the future, so acquiring the skills to deal with such matters is more important than ever.”

The Share Centre surveyed 1,120 investors between 29 July and 16 August.  

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Earlier this year, research from Zurich UK similarly demonstrated a lack of financial understanding among young people. In April, a survey of 2,000 adults by the insurer found that the majority of millennials blame a lack of savings for preventing them from achieving their life goals.

“With the savings ratio at a record low (1.7 per cent) and a recognized need for people to save and invest more in order to secure their, and their families’, financial futures, it is clear that more needs to be done in schools,” said Richard Stone, chief executive of The Share Centre.

“With money increasingly electronic in form and therefore more challenging to grasp as a concept for younger children, and with investment and savings now predominantly undertaken online, alongside banking, the educational challenge for parents is ever growing.

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“It is vital that knowledge of basic concepts such as compounding, interest rates and investment returns are passed on to future generations by parents and grandparents – perhaps by engaging younger members of the family in setting up a Junior ISA or Lifetime ISA account and incentivizing some of that learning through parental (or grandparental) contributions and encouragement.

“For those able to take on this challenge, and to support those less able to do so, the role of schools and more formal financial education is vital and we would urge the government to put more resources into ensuring this is delivered effectively as an important, ongoing and enduring part of the curriculum.”