Financial Awareness Day 2024

Bridging the Knowledge Gap in Personal Finance

Managing your finances can feel complex, but National Financial Awareness Day recognised on April 25th [1] is your chance to take control! Imagine the peace of mind that comes with financial security. The ability to manage money effectively equips you with the tools you need to make informed decisions about your financial goals, from a dream vacation to a comfortable retirement. Regardless of your background or current financial situation, National Financial Awareness Day is a reminder that anyone can unlock their financial potential.

 

The Financial Knowledge Gap in the UK

When it comes to financial literacy in the UK, there is a significant gap in the number of individuals equipped to make smart decisions about their finances.  A 2022 study by the Money and Pensions Service (MaPS) found that only 22% of UK adults felt confident managing their money [2]. This lack of knowledge can have a serious impact on people’s financial health.

Financial literacy encompasses many areas of personal finance, including debt management, saving for large goals like buying a home, or even making smart investment choices. However, many people struggle with these tasks due to a lack of financial knowledge. These consequences of financial illiteracy can then have a significant knock-on effect, leading to difficulty planning for the future, achieving financial security and a comfortable retirement.

A major factor contributing to this knowledge gap is the absence of financial education, particularly for young people.  Only 47% of 7-17 year olds receive basic financial education at home or school, leaving millions without the basic skills they need to navigate the financial world [2].

This lack of knowledge translates into poor financial decisions, such as borrowing money and later getting into debt. In May 2022, 12.9 million UK adults had low financial resilience – 1 in 4 (24%) of all UK adults [3]. These are people who are in financial difficulty, or who could quickly find themselves in difficulty if they suffer a financial shock, because, for example, they have little to no savings or are heavily burdened by their domestic bills or credit commitments.

The impact goes beyond individual finances.  A financially stressed population is more vulnerable to economic downturns, like the current cost-of-living crisis.

Financial literacy empowers individuals to make better financial decisions and utilise the resources available to them.  With a better understanding, people can start to prepare for challenges by managing debt, building emergency savings, and making calculated financial choices.

 

Taking Charge with Financial Awareness

Financial literacy empowers individuals to confront financial decisions with confidence, and financial awareness begins with several key areas. These include budgeting, saving, managing debt (credit cards, overdrafts, personal loans), investing (ISAs, pensions), and planning for retirement (State Pension, private pensions).

 

Building Your Financial Toolkit

Being financially aware is the foundation, but to empower yourself, you need a toolkit of practical strategies. These should include:

 

Reflecting on Your Financial History

Understanding your past experiences and recognising patterns in how you deal with financial obligations is crucial.  This self-reflection helps you identify what may be holding you back, so you can develop healthier financial habits and utilise available resources.

 

Recognise Money as a Tool

Start to view money as a tool to achieve your goals and live a fulfilling life, not as a measure of self-worth. Strategically utilising your money to support your aspirations is the key to success.

 

Define Your Financial Goals

Set SMART goals (Specific, Measurable, Achievable, Relevant, and Time-bound) that align with your priorities. Having clear objectives keeps you motivated and focused.

 

Build Healthy Financial Habits

Develop consistent habits like budgeting, saving, and responsible debt management. This lays the groundwork for financial stability and peace of mind. You could do this through methods like allocating a fixed portion of your income to your savings each payday, automating contributions to investment accounts via direct debits, or adopting small changes, such as rounding up spare change.

 

Avoid Emotional Spending

Curb impulsive purchases by pausing before buying and considering if you really need it in comparison to your main objectives. Prioritise long-term goals over instant gratification.

 

Fostering Open Communication

Discuss finances openly and honestly with your partner or family. Transparency builds trust and minimises conflicts when making financial decisions. This will also make it easier to ask for help if you need it.

 

Embrace Long-Term Thinking: Focus on delayed gratification and prioritise saving and investing for your future goals. Develop patience and discipline in your financial management.

 

Being aware of your finances equips you with the means to navigate life’s surprises with peace of mind and confidence.  We hope the advice from this article can be used as a springboard towards building a knowledgeable and secure financial future. Reaching out to a financial adviser can provide valuable guidance and support on your journey to financial success.

 

SOURCE DATA:

[1] – National Finance Awareness Day – Days of the Week

[2] – Money and Pensions Service (MaPS) – UK Children and Young People’s Financial Wellbeing Survey

[3] – FCA – Financial Lives 2022 survey

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