Have you ever thought about financial education? New statistics quoted by the National Savings & Investments organisation (NS&I) show that millions of Brits (15 million) wish they had experience some sort of financial education as they were growing up. Financial education is understanding how your personal finance works such as how to balance your income and expenditure and how to make a monthly budget that you can stick to.
Why is financial education important for Brits?
The retail industry plays a pivotal role in the business sector of the UK and it is also a powerful force based on the all of the people that it employs. A massive retail industry from supermarket giant to clothing has meant that many Brits feel like they constantly need to spend money because there is a temptation to spend money all of the time, from the high street to the Internet.
According to the NS&I, 4 million Brits say that they feel out of their depth when it comes to managing their money. This is highlighted with another slice of research showing that 7 million British people do not have savings either. This proves that financial education is absolutely critical for the future success of every Briton’s personal financial future.
Why do some Brits feel confused about managing their money?
As the NS& I research found, many British people feel worried about managing their money. This is because money is not only cash that we hold in our hands but we are also tempted to spend money at all corners.
Tips to improve financial knowledge when it comes to personal finances
These top tips will help all people in the UK make adequate changes to how to manage money effectively.
- Always start with the children: Whether you have children or not, it is important to educate the next generation of spenders and savers about their personal finances. This can include anything from showing them how to budget early to how to save. Many children first learn about money from their parents’ behaviour towards money. It’s crucial to set a good example for young children by teaching them about loans and credit. If you are going to borrow, always make sure to borrow from responsible lenders to avoid any financial pitfalls that may follow. Children are fast learners and the helpful lessons that you teach them now can help them change for the future. Teach them some financial education tips!
- Learn about budgeting: Of the people surveyed in the NS&I report, 55% said that the most important thing to learn was about how to budget effectively. Budgeting remains one of the most popular elements about personal finance but it is one that many people often get wrong. Consumers have many things to spend their money on from household goods, bills, shopping, eating out and entertainment. With so many avenues to spend money, budgeting is something that has to be taught and followed correctly in order to ensure that people learn about their personal finances.
- Read personal finance blogs: Some people learn better from hearing the experiences of others who were in their situation. From the explosion of ‘getting out of debt blogs’ to blogs that chronicles people trying to get a mortgage, personal finance blogs can also help to provide plenty of context into a situation for customers. If you want to hear plenty of real life stories of how to improve personal finances, it is a good idea to look for blogs and online content.
- Always read the small print: The terms and conditions of all loans and credit is something that many people in the UK don’t read. You can minimise the financial trouble that you can get into from loans and credit as long as you read the terms and conditions. Some loans have multiple repayments while other short term loans require you to repay your loans immediately. Get into the habit of reading the terms and conditions before you agree to a loan to ensure that it is right for you and your lifestyle.
- Understand how mortgages work: The property market is one of the most important sectors of the economy in the UK. Many people are trying to get onto the property ladder while others have become buy-to-let moguls. The Council of Mortgage Lenders found that mortgage lending swelled to £17.6bn in February alone. The Council also found that remortgages have increased as more people look to their mortgages as an asset and a form of credit.
Getting a mortgage is a dream but for many Brits, it feels out of reach even though it does not need to be. One of the first steps people need to make is choose a property that they can afford. Decide whether you need a property for your future or for commercial purposes. Once you know what type of property that you want to get a mortgage for, you need to start saving as soon as possible. Depending on the worth of your property, it is difficult to know how much you need to save. Ultimately, you need to do research and know the exact amount you need for a deposit.
- Know how much your household bills are per month: Household bills can vary every month but in general, you need to know how much your bills are. If you can, advance pay your bills so that you have already sorted them out for the month. Household bills to know and understand completely include water, gas & electric and Internet bills. Your monthly phone bill or your pay as you go phone is also important to know. Mobile phone usage has exploded which means that consumers are spending more money buying phone credit or paying their phone bills.
- Know how many direct debits you have: Direct debits make payments going from your account easier and it also helps you to pay your bills on time. You need to know the exact dates that your direct debits are due. A good way to keep track of them is to write them down in a notebook or put them in reminders on your phone preferably two days before they are due.
- Keep your credit card free of fees: The British Bankers’ Association (BBA) found that in November 2014, 43% of credit card holders did not incur any fees on their balance, according to a report. This shows a change in how borrowers are using credit cards by focusing on fiscal responsibility by avoiding charges or fees on their credit card balances. Avoiding extra credit card fees such as late fees will also help you budget and keep your finances in check.
- Put a limit on how often you buy clothes: The rise of social media has made it easier for people who love to spend money on jewellery and clothing to get regular inspiration on shopping. Clothing spending should be based on need and how much disposable income you have to buy clothes. If you are looking for ways of avoiding expensive high street clothing, looking for outlet clothing as well as affordable clothing that fits your budget. Some consumers like to buy clothing every month, while others prefer every other month. Whether you are buying clothes for yourself or for work, it’s important to stick to a strict budget to avoid overspending on purchasing clothing.
- Know saving interest rates: Saving money is important if you are trying to improve your personal finances. Most of us wish that we could save more but coming up with strategies to do it can be hard. If you plan on saving money in a bank account, you should be familiar with the interest rates that your bank has for your money. This affects how much money your savings will earn in interest.
- Have an emergency fund: With tough economic times that have affected people of all backgrounds, the importance of having an emergency fund has become even more important because of the recession. In a post-recession world, it is a good idea to have an emergency fund in case of a bereavement or if you lose your job. Three months living expenses is ideal but even if you have one or two months, this will help you exponentially navigate a difficult financial time.
- Lending money to friends is a difficult thing to do: Most people know that if they lend money to friends or family members, there is a possibility that they will not see it back. If you are lending money to friends or family, make sure that you have an agreement in place that specifies when your friend or relative has to pay you back. If you do not think that you will get the money back or you do not expect the money back, you should make this a gift with no expectation of seeing the money come back.
- Saving up for holidays: Holidays are a unique part of British culture whether you are going on a European weekend break or you are going on a staycation in the UK. If you want to go on a holiday, you need to save up for it months in advance in order for it to make financial sense. Some people have bank accounts just for holiday savings. If you want to go on holiday without spending a lot of money, use moneysaving tips that many Brits use on holiday. These include ideas such as choosing affordable destinations such as Spain and staying in a B&B instead of a luxury hotel. With a frugal focus on travelling, you can still go on holiday without having to spend a lot of money to do so.
- Make a detailed budget for your family as well: When it comes to thinking about budgets, it should not just stop with you and what you spend. If you have a family that you are taking care of such as your children, parents, aunts, uncles or cousins, you will also need to take into account their needs. This is particularly true if you all live under the same roof. If you are a parent, you should factor in your children’s requirements significantly into your budget including disposable income spending such as child days out to amusement parks, toy shopping and eating out with your children. This is where financial education comes in handy.
- Know exactly when loans are due: Whether you have applied for a payday loan or if you have applied for a short term loan, you need to have a calendar about when your repayments will be made. This is the best way to manage the loans that you have and to avoid any late payment fees that you might have to pay.
These financial education tips above highlight the importance of financial knowledge which can be had thanks to research, the Internet and books.