Could number skills help tackle the NEETs crisis?
Around 40% of UK adults do not have a firm grasp on basic financial concepts - but for the growing number of NEETs, it could be the key to help them build a stronger future.
Almost half of all adults in the UK struggle with financial literacy. Many do not understand the three key concepts – compounding returns, inflation, and risk.
Without understanding these concepts, building financial independence becomes harder. Indeed the rising levels of young people not in education, employment or training can be linked back to poor numeracy skills in schools.
A landmark report by former minister Alan Milburn found around one million young people (one in eight) are NEETs, and this number is rising.
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That presents a “huge national challenge”, says Lizzie Gaisman, chief executive of The Richmond Project, a charity founded by former prime minister Rishi Sunak to champion numeracy.
One of the factors contributing to this rise is a lack of confidence with numeracy, Gaisman tells Kalpana Fitzpatrick, digital editor-in-chief, on the MoneyWeek Talks podcast.
“We all believe – and now hopefully our research underscores – that confidence with numbers and what that means in terms of people’s daily life and finances, is an absolutely critical driver of social mobility for people.
“Without it, it’s really hard to find opportunities, to make the most of opportunities, and the downside risk is also really strong for those who don’t have that core conceptual understanding [of finance].”
Gaisman says issues like the rising number of NEETs in the country are always complex with many different root causes, but adds: “I do feel very strongly – and I wouldn’t be in this job if I didn’t – that numeracy and financial literacy are sitting really at the heart of that web for our young people.”
Why do Brits have poor financial literacy?
There are major disparities between the financial literacy of different groups in the UK. Research by The Richmond Project shows there are large socioeconomic, age, and gender gaps that are leaving people without the financial education they need.
Gaisman says: “We’ve got quite a big challenge in front of us as a country, and that’s particularly acute for groups who have already got quite a lot to contend with.”
There can be many reasons people do not have the financial education they need. Gaisman notes that a lack of confidence in maths plays a key role.
“Our research shows if you’ve got poor financial literacy, you are four times as likely to say maths was your least favourite subject at school. There is an element of what we know to be quite a negative emotional association with maths or with your confidence around maths that’s playing a role here.”
She adds that for things to change, there needs to be a cultural shift to make people more comfortable with basic numerical concepts to boost financial confidence and literacy.
There is also an inter-generational challenge. “We know that if your parents don’t feel that they have the tools that they need to manage their financial life, it is really hard for you as a child to absorb those skills in your home life because you're not seeing the role-modelling.”
One way to help bridge this gap is by introducing more financial education in schools. The Richmond Project has already partnered with the Department for Education to help children learn more about these concepts in their classrooms.
“The big three things [compounding returns, inflation, and risk diversification] are transformational for people to learn and we’ll be testing the curriculum because it’s not only the ‘what’, it’s also the ‘how’ you’re taught as a child that makes a big difference.”
For more on why Britain needs higher levels of financial literacy and more, listen to the full episode of MoneyWeek Talks with Lizzie Gaisman on YouTube or wherever you get your podcasts. You can also catch up with our previous podcast episode with Rishi Sunak, talking about how his charity wants to help change financial education.
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MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick, Andrew Van Sickle and Cris Heaton are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.
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