Finance Education: What Works? True Potential PUFin Annual Conference Church House Conference Centre Tuesday 14 November 2017 #PUFin @OUBSchool @TruePotential_ #FinCap17
WELCOME AND HOUSEKEEPING Nigel Cassidy Financial Journalist #PUFin @OUBSchool @TruePotential_ #FinCap17
INTRODUCTION Professor Janette Rutterford Research Professor, True Potential PUFin, The Open University Business School #PUFin @OUBSchool @TruePotential_ #FinCap17
The journey from childhood skills to adult financial capability Dr Gavan Conlon (London Economics) Kirsty Bowman-Vaughan (Money Advice Service) Tuesday 14th November 2017 The Money Advice Service
1. Background The journey from childhood skills to The Money Advice Service The Money Advice Service 5 adult financial capability
Project Overview Key Aims • To understand the relationship between CYP skills and adult financial outcomes • To understand the relationship between adult financial outcomes and other adult outcomes The journey from childhood skills to The Money Advice Service 6 adult financial capability
1970 British Cohort Study • Covers 17,000 individuals born in England, Scotland The 1970 British Cohort Study does not and Wales in a single week of 1970 cover today’s CYP • Has tracked the same individuals over the last 47 years – in fact, some of them are parents of today’s CYP – • Contains information on health, physical, educational, social development, economic & labour market but provides a unique opportunity to circumstances & other characteristics at different ages explore the links between CYP skills and • Previous research has found links between CYP skills adult outcomes and adult employment outcomes The journey from childhood skills to The Money Advice Service 7 adult financial capability
Key indicators in BCS70 CYP skills (ages 5, 10, 16) Adulthood (ages 34, 42) Cognitive skills Behaviour Financial outcomes General intelligence tests Agreeableness Regular saving Conscientiousness Pension saving Literacy/reading Emotional health Debt/income ratio Numeracy Extraversion Financial self-assessment O Level performance Good conduct Non-cognitive skills Neuroticism Academic self-concept Challenge Unless stated otherwise, the analysis controls for Locus of control childhood personal and socioeconomic characteristics (gender, ethnicity, household size, parents’ education & Self-esteem employment status, social class & family income, child Self-control rearing attitudes) Social skills The journey from childhood skills to The Money Advice Service 8 adult financial capability
2. Findings The journey from childhood skills to The Money Advice Service The Money Advice Service 9 adult financial capability
CYP skills & financial outcomes The journey from childhood skills to The Money Advice Service 10 adult financial capability
1970 British Cohort Study Low debt-to- Financial self- Regular saving Pension saving Skill measure income ratio assessment (age 34) (age 34) (age 42) (age 42) Cognitive ability Age 16 Non-cognitive ability Behavioural score Cognitive ability Age 10 Non-cognitive ability Behavioural score Cognitive ability Age 5 Non-cognitive ability - - - - - - - - - - - - - - - - - - - - - - - Not captured - - - - - - - - - - - - - - - - - - - - - - - Behavioural score The journey from childhood skills to The Money Advice Service 11 adult financial capability
Role of intermediate outcomes Intermediate outcomes Educational attainment Employment status Income Marital status Home ownership The journey from childhood skills to The Money Advice Service 12 adult financial capability
Financial and other adult outcomes Other adult outcomes Health self- assessment Mental health Absence of long-standing illness Life satisfaction The journey from childhood skills to The Money Advice Service 13 adult financial capability
Pension saving The journey from childhood skills to The Money Advice Service 14 adult financial capability
Financial self assessment The journey from childhood skills to The Money Advice Service 15 adult financial capability
3. Implications The journey from childhood skills to The Money Advice Service The Money Advice Service 16 adult financial capability
Key Aims • Starting young matters • It’s more than just cognitive skills • Money doesn’t exist in isolation • Improved targeting • Improved content? The journey from childhood 17 skills to adult financial The Money Advice Service capability
Getting school-leavers ready for financial independence (New course: Managing My Money for Young Adults) Martin Upton Director, True Potential PUFin, The Open University Business School #PUFin @OUBSchool @TruePotential_ #FinCap17
Building on the trilogy of free personal finance courses Over 300,000 registrations Now..Managing My Money for Young Adults Kindly supported by the Chartered Accountants’ Livery Company Charity #PUFin @OUBSchool @TruePotential_ #FinCap17
The clear need for help - Our research - youngsters in debt - FCA - young adults struggling with money - StepChange - under 25s in growing trouble with debt #PUFin @OUBSchool @TruePotential_ #FinCap17
Course covers timeline from 16 years - Financial products - Budgeting at home and away from home - Financing higher education #PUFin @OUBSchool @TruePotential_ #FinCap17
Course covers timeline from 16 years - Living in a shared rental - Being smart in the market place - Borrowing sensibly - Planning for the future #PUFin @OUBSchool @TruePotential_ #FinCap17
Three-year programme - Course production - Launch and roll-out - Individual and classroom delivery - Assess effectiveness #PUFin @OUBSchool @TruePotential_ #FinCap17
Here’s the course http://www.open.edu/openlearn/money- business/managing-my-money-young-adults/content- section-overview ..and here’s the budgeting web -app www.managingmybudget.com #PUFin @OUBSchool @TruePotential_ #FinCap17
The mission to educate will continue…. - Bespoke courses targeting specific social groups - Financial education at the point of transacting - And learning from our testing of ‘what works’ #PUFin @OUBSchool @TruePotential_ #FinCap17
SESSION 1 DISCUSSANT Jeanette Makings Head of Financial Education Services, Close Brothers Asset Management #PUFin @OUBSchool @TruePotential_ #FinCap17
PANEL DISCUSSION AND Q&A Facilitator: Nigel Cassidy Jeanette Makings Dr Gavan Conlon Kirsty Bowman-Vaughan Jonquil Lowe Martin Upton #PUFin @OUBSchool @TruePotential_ #FinCap17
COFFEE BREAK Please return to your seats by 14:45 #PUFin @OUBSchool @TruePotential_ #FinCap17
Financial capability for Just About Managing (JAMs): results of PUFin-MAS project Will Brambley Research Associate, True Potential PUFin, The Open University Business School #PUFin @OUBSchool @TruePotential_ #FinCap17
Stylised Fact #1 Adults who most need financial education don’t look for it • Prevention is better than cure: it’s much easier to prevent financial difficulties than get out of them • Finance is boring: people don’t look for help until something triggers them to engage, usually a negative shock putting them into difficulty • Fin Ed appeals to the financially capable: those interested enough to seek it out already doing ok • Reaching those who most need help tends to require expensive and intensive interventions #PUFin @OUBSchool @TruePotential_ #FinCap17
Stylised Fact #2 Resilience is vital but most people are Just About Managing • 80% do not have recommended 3 months’ income saved to weather redundancy or illness • 35- 50% aren’t saving anything • 25% have negative financial wealth & could withstand no shock • £1000 in household savings would stop half of all problem debt from occurring – 500,000 per year #PUFin @OUBSchool @TruePotential_ #FinCap17
Stylised Fact #3 The problem is more psychology than knowledge • If you ask people what proportion of their income they should save for a rainy day, what’s the most common answer? – 10% • Most people know ‘the right thing’ to do • Most people don’t do what they think is ‘the right thing’ #PUFin @OUBSchool @TruePotential_ #FinCap17
Can behavioural insights help us design more effective financial education? • Use information to nudge people to action more than to inform • Design it for people with no interest in finance, not for the authors – Make it positive, short & immediately relevant – Focus on resilience – make the need for & benefits of it real – Make it easy to do ‘the right thing’ – small, manageable actions; remove barriers (mental & physical) – Proactively take it to people, don’t make them look for it • Test if it works! #PUFin @OUBSchool @TruePotential_ #FinCap17
Managing My Money for the JAMs #PUFin @OUBSchool @TruePotential_ #FinCap17
Managing My Money for the JAMs #PUFin @OUBSchool @TruePotential_ #FinCap17
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