In 1758, Benjamin Franklin, a United States’ founding father, wrote one of the earliest publications on financial advice in an essay entitled ‘The Way to Wealth’. Franklin recognised the value of sound financial advice and understood the relationship between education and its significant return on any investment. Perhaps his most compelling quote in the book was: “An investment in knowledge pays the best interest”.

More than 260 years later, his thoughts resonate just as much, and particularly given the complexity of finance and the uncertainties facing investors.

We are also in need of as much financial advice as Franklin’s contemporaries were, considering many of us didn’t receive any education on the subject at school. Even for those that have had some lessons – for example, those who were studying when financial literacy was included in the UK’s national curriculum in September 2014 – the numbers still aren’t stacking up.

According to a recent report by the London Institute of Banking and Finance, although 64% of young people between 15 and 18 years old in the UK have access to financial education in school, 75% say they receive most of their financial understanding from parents. Only 8% viewed their school studies as their main source of knowledge.

Yes, these figures are an improvement on the 29% who stated they had access to financial education in 2015, but they’re still lower than those who introduced the subject had hoped, and the percentages have plateaued over the last three years. And of those who do have access, the majority state that they study personal finance for less than an hour a week. 15% state that it was over a year since they last had a lesson and a further 23% couldn’t remember when that last class was.

So what is the issue? One factor is that only 3% of 15-16 year olds and 8% of 17-18 year olds are taught financial education as a separate subject. For the majority of students surveyed, the information is ‘only’ being taught as part of PSHE (personal, social, health and economics, although the economic element still isn’t required in statute), maths, economics and citizenship classes.

A survey by the Financial Times (FT) highlights the results of this limited focus. When asked, fewer than half of 16-24 year-olds knew that the value of money would be eroded if it earned 1% when inflation was running at 2%.

Financial education levels among the adult population are also lower than they could be. When asked in the FT survey to compare the cost of borrowing on a credit card versus that of a bank overdraft with specific charges, barely half got the right answer. And this answer varied only minimally across wealth brackets, ages, ethnicity, region or gender. 

It’s not just the UK that is struggling. In 2002, the Organisation for Economic Co-operation and Development (OECD) recognised the importance of financial literacy and created the International Network on Financial Education in 2008, which now has a high-level membership of 278 public institutes from 130 counties. However, its 2020 survey covering 26 countries highlighted how much work still needs to be done, as a mere 26% of the adults answered the questions on simple and compound interest correctly.

What is the most worrying for me is that although many people cite family and friends as their go-to individuals to talk through their finances, many people struggle to even start a conversation about money with their immediate family.

So where do you start when it comes to investing in knowledge?

We believe it begins with a conversation, and there are five key topics every family should have discussed once you believe your children are old enough, or even once they have become adults:

  1. What long-term financial goals do you have for you and your family?
  2. Have you prioritised your financial wish list?
  3. Do you have any plans in place for your retirement?
  4. If/when something serious were to happen, what are your wishes with regard to your healthcare, funeral and possessions?
  5. Who would you trust to help your family with regard to finances, e.g. who are the executors of your family’s wills, have you designated anyone in any lasting powers of attorney?

Once you have an understanding of these, you could then start to make decisions based on your priorities, and those of your family, to set out how much money these plans might cost. The discussions should also help you determine any gaps between that potential total and what you’ve already saved, and what might need to change for you to achieve your financial aspirations (if anything).

If you decide to make an investment towards that future, you may relish the thought of spending time researching all of your options and reaching your own decisions. Alternatively, the idea of making these decisions without any assistance might fill you with horror! In this instance, it is worth noting that we have an experienced and knowledgeable team of private bankers and wealth planners, many of whom are qualified at a much higher level than the industry’s minimum requirements.

We are confident we have the necessary knowledge and skills, and are ideally placed to assist you in reaching a decision on at least one aspect of your finances, and perhaps more.

If you would like to start a conversation – with absolutely no obligation after a conversation or even a meeting – we’d be delighted to hear from you.