Employers urged to step up financial education to protect millions from exclusion

The latest jobs numbers seem to suggest employees hold all the cards. With a million vacancies and employment figures, astonishingly, back up to pre-Covid levels, business leaders complain of a huge demand for more staff.

Some industries have seen wage rises of a third since 2014, analysis of this week’s data from the Office for National Statistics shows.

But even with such significant salary increases in some – but certainly not all – industries, our bosses are still missing a huge financial trick. And their staff, businesses and even society at large are the poorer for it according to a new report that has issued renewed warnings over the impact of widespread financial exclusion.

It’s easy to assume that financial exclusion – defined by the Joseph Rowntree Foundation as “the inability, difficulty or reluctance to access appropriate, so-called mainstream, financial services” – is a problem for those out of work or on very low incomes.

With its close links to social exclusion, many believe this is an issue for government to deal with.

But with new research showing that just nine per cent of UK employees arrive in the workplace with any kind of formal financial education – lower than the average 12 per cent across the Europe, Middle East and Africa (EMEA) region – the debate is rolling back round to workplace financial education as a way to drive social mobility, financial inclusion and mental wellbeing among the 29-million strong workforce.

Data from financial wellbeing platform nudge warns that, despite financial education having become part of the core curriculum in schools, the lack of inclusion and education means huge swathes of the working population are ill-prepared to make financial decisions or deal confidently with financial shocks.

This is starkly apparent in the wake of the Covid-19 crisis, it suggests, with more than a third of employees reporting anxiety about their financial situation and a quarter even reporting shame over their circumstances.

Few get professional help. A significant 40 per cent say they are excluded by the financial industry, rising to almost half for women, while almost 60 per cent are from Asian backgrounds and almost two-thirds (63 per cent) are people with mixed ethnicity.

Existing financial systems are failing to provide the varying levels and types of support required by diverse employees, the report warns.

“As income providers, employers have the potential – and responsibility – to step up and fill the gaps,” it states. “But right now, less than a third of employees are offered personal finance education related to their personal circumstances and interests as an employee benefit.

“And 59 per cent do not believe their employer is interested in helping them achieve their financial goals.”

What’s more, the data points to an alarming imbalance among those who do receive support.

High earners are 51 per cent more likely to receive financial education from their employer than low earners, and are 34 per cent more likely to say their employer is interested in supporting their personal finance goals.

This trend contradicts findings from across the EMEA region, where low earners are marginally more likely to receive financial education.

“The correlation between earnings and financial education is a concerning trend. In the UK, high earners are twice as likely to have received financial education at school (14 per cent vs seven per cent)”, says Jeremy Beament, co-founder and director, for nudge Global.

“Our data suggests that this education advantage is continuing into the workplace. There’s a real opportunity for employers around the world to address this imbalance and improve the financial knowledge of the workforce more broadly.

“In doing so, they will help resolve feelings of financial exclusion, support social mobility, and create a better employee experience that fosters improved wellbeing.”

The research echoes numerous previous studies that, somewhat unsurprisingly, identify a clear link between a workforce’s financial wellbeing and its mental state.

Two-fifths of UK employees tie their self-worth and contentment in life to the number they have in their bank account. This is particularly true of women and younger employees, the research has found.

But with 30 per cent reporting depression about their finances, regardless of headlines about the effect of Covid on savings rates, debt repayment and wage increases, nudge believes they’re likely to be experiencing broader feelings of discontentment and inadequacy.

Yet there is also clearly an appetite among employees – and younger employees in particular – to improve their financial knowledge. Almost a third of 18-24 years olds turn to YouTube videos to educate themselves about personal finances, with almost the same proportion (29 per cent) looking to TikTok.

Separate research from F&C Investment Trust suggests that for 83 per cent of Gen Z – around 1.4 million young adults – social media has influenced their financial decisions.