by Michelle Highman, Chief Executive
As the UK’s leading financial capability charity, we’re always interested in finding the best ways to help people stay on top of their money. So we were excited to launch research with Keep Me Posted this week, conducted by London Economics, that looked at how people engage differently with financial information provided online or on paper.
The research throws up fascinating insights into how people engage with their money differently online and on paper – even when they’re incentivised to get the answers right. I’d encourage you to read the executive summary, or even the full report. It’s not often that a financial capability study genuinely surprises me, but the stark differences between people’s ability to understand information, make good choices, and the actions they then take depending on how they received the information were striking.
But as well as the findings of difference, the research also highlights the lack of financial capability across all people (and remember that this didn’t just ask people to say how confident they were about doing it; it actually made them try it).
Across all the participants, a massive 34% couldn’t identify the closing balance of a bank statement, and 42% couldn’t give the largest incoming payment. These are simple, everyday tasks, and the bank statements (at the end of the full report) are not particularly tricky. Only a little more complicated – but still vital – are assessing whether a payment can be covered (45% couldn’t) and assessing the financial health of the account (35% couldn’t).
And when it comes to doing something proactive to improve their financial situation, the picture looks even bleaker: 71% couldn’t identify the correct action to improve their interest rate. If people struggle to perform straightforward tasks like these, making more complex decisions about their finances – or their pensions – can’t be made without significant support.
Those figures are petrifying, and a big lesson for all sorts of financial capability policy areas. It’s often assumed that the instant access offered by online financial services can only be a good thing, but this report shows the need to think again.
Of course, this will be different for different people. So although we think policymakers, regulators and firms should take this research on board and use it to guide their approach to customer communications, for individuals what’s important is that you think carefully and honestly about whether you’re really engaging with your bank statements – and whether using both paper and online statements might put you more on top of your money.