In my day job at the Bank of England, I rely heavily on financial expertise. On my doorstep is the City of London, with as deep a pool of financial expertise as in any city in the world. Yet when I travel around the UK speaking to people about everyday decisions, that financial expertise is often far thinner on the ground.
The evidence bears this out. In the latest OECD survey of adult financial literacy, the UK ranks 17th out of 17, on a level pegging with Albania. This lack of financial knowledge matters — to the everyday decisions of millions of people to the strength of our economy and the stability of our financial system.
Those with low levels of financial literacy tend to make poorer choices about saving and borrowing. This helps explain the problem of under-saving by households, with around 40 per cent of the UK working population having less than £100 set aside. It helps explain the problem of over-borrowing, with almost a third of the population reporting signs of financial distress.
And it contributes to some people being excluded from the financial system, with more than one and a half million people not having a bank account.
These problems of financial health can be a recipe for broader health problems, with those in debt three times more likely to have a mental health disorder.
Improving money skills is a key ingredient in boosting productivity among companies and pay among workers. With both having been laid low for a decade, this is crucial. Improving financial literacy would also help reduce the risk of excessive debts and defaults in the financial system.
The UK’s financial literacy problems have no single cause. But it is no coincidence that levels of numeracy across the UK are low by international standards and are, if anything, falling further.
A remarkable 17 million adults only have the maths skills of a primary school child. This lack of number sense is a weak foundation upon which to build good financial sense. That is why today — the second National Numeracy Day organised by the charity of the same name — is so important. It is a call to arms about the need to tackle numeracy and financial literacy.