Large number of Scots lack the knowledge to manage their finances, research shows

News - Banking

Written by Ray Clancy

Wednesday, 25 August 2010 10:24

Many Scots lack sufficient financial know how to manage their money research for the Scottish government has found.

Basic knowledge such as the day to day management of finances, planning ahead for retirement and unexpected events and knowing where and how to seek financial advice are lacking, according to the research from Edinburgh Napier University.

Other skills such as efficiently selecting financial products and understanding these products and having the motivation to efficiently manage finances and effect change are also lacking, it has found.

Researchers say there is an urgent need to improve the Scottish population’s money management capabilities especially for the young and unemployed.

The university’s Employment Research Unit found that those needing most help are younger people, those on low incomes, those with children and those with poor levels of education, literacy and numeracy skills.

The new research highlights current high levels of unemployment and personal debt and the need to address and improve financial capabilities across Scotland, particularly for the most disadvantaged and those with reduced incomes.

The Employment Research Institute in Edinburgh Napier University was commissioned by the Scottish Government to provide an overview of current evidence on financial capability of Scots in relation to disadvantage.

The evidence suggests that unemployment and debt issues can have serious negative consequences, not only on individual and household finances, but also on health and well-being and employability. They also affect local and national economies in terms of reduced spending because of people paying higher than necessary interest rates and the employability of job seekers.

‘The ability for individuals to manage their money or not has a knock on effect on the wider economy. In the current economic environment particularly, improving financial capability requires co-ordinated action by the government, other relevant authorities, such as Community Planning Partnerships, and private and third sector bodies,’ said Professor Ronald McQuaid, director of the Employment Research Institute at Edinburgh Napier University.

‘Those disadvantaged groups who are financially incapable, and likely to suffer significant negative consequences when things go wrong, need particular support. This should, where appropriate, be linked to other forms of support throughout the life-course, rather than being treated in isolation,’ he added.

The researchers analysed the main components of a financially capable person which included abilities, understanding, competence, knowledge and motivations to deal effectively with financial issues.