Financial Capability and its Place in the New Reality!

New reality: get good marks that few think are credible, go to university, accumulate student debt, compete against global peers, work an average 43 hour week, rent, raise a family if you can afford it, zig-zag for 45 years through dozens of companies, retire with whatever you have managed to save, live to 81.

Benjamin Disraeli said that "a University should be a place of light, of liberty, and of learning" and we agree. University lets you experience a rich cultural and social scene, meeting a variety of people while studying something you (hopefully) love.

Of course there are also monetary benefits to attending university. Research by Skandia, an investment company, found graduates leaving university today earn an average of £600,000 more over a working career compared to an 18-year-old entering the workforce from high school. This is predicated on finding employment obviously but it's a pretty telling statistic.

None of this is will guarantee financial success if students don't put some energy into raising their financial capability skills. Even with an above average salary financial stability may be unattainable because becoming financially stable has less to do with how much you earn and more to do with how much you keep.

This is a critical distinction because the only money GenXs and millennials will be able to rely on is the pot of money we manage to accumulate. The reality we face is very different to the one our parents faced.

Old reality: get good marks, go to university, compete against local peers for a good local job, work a 35 hour week, buy a home, raise a family if you want, work 40 years in the same company with regular promotions, and retire with a defined benefit. Live to 72

New reality: get good marks that few think are credible, go to university, accumulate student debt, compete against global peers, work an average 43 hour week, rent, raise a family if you can afford it, zig-zag for 45 years through dozens of companies, retire with whatever you have managed to save, live to 81.

The world has changed but expectations have not been managed and a failure to understand the impact of that truth has left many confused and unprepared. The 2011 Graduate Prospects Survey found that a sixth of university leavers expect to earn £100,000 or more by the age of 30. In reality only 25% will earn more than £30,000 10 years after completing.

Too many lived for too long beyond their means and slowly we are becoming proficient at cutting back. We've learnt how to squeeze the pennies and there are plenty of websites directing us to deals and discounts. What we aren't taught to do is plan for tomorrow and understand why it's important. As critical as finding the right energy tariff is, and as satisfying as it is to find that great shoe bargain, deals are not how we take control for our financial future. For that we need a strategy.

Not having a sufficiently broad or deep financial education isn't a new problem but the consequences have become more severe because we are faced with an ever more complicated range of products and decisions.

The less people know the more they get into financial difficulty which, as the ongoing credit crisis will testify is a problem for individuals and for the country. Simply, we need to get more educated about money so that we can take better control.

We need the capability and skills to plan our financial future with the same confidence we have planning a holiday. When it comes to planning a holiday we pack outfits for every eventuality, obsessively check the weather forecast and take some "just in case" cash and emergency phone numbers. Yet when it comes to our money we don't have a plan, we don't keep an eye on the horizon and we certainly don't have an emergency stash of money.

So why don't more people put a money plan together? Learning about money has always been dull - deliberately touted by professionals as complicated and seemingly dominated by maths and spreadsheets. So the learning is pushed off the agenda in favour of talking about anything else and this must change. We need to put financial education front of mind by making it relevant and engaging and interactive and most of all fun.

Money is not dull and it is not a subject. It is the fuel of our life and if we aren't masters of our money we will surely become slaves to our debt.

Close

What's Hot