Financial capability in the UK 2015

1. Context
2. The study
3. Key findings
4. Points to consider

Context

This research contributes to the development of the Financial Capability Strategy for the UK, and builds on a number of prior studies, in particular, the qualitative Financial Capability and Wellbeing study. This report represents only the initial findings of the research, and covers two of the three objectives of the study as a whole. These are:

1. To provide a map of financial capability according to key demographics such as age, region and household composition.
2. To provide a tool which contributes to understanding the drivers of and barriers to financial capability.

A third objective, to provide an ongoing monitor of financial capability, requires further analysis of the research data. This will take place during 2016, and the results will be published later in the year.

The study

This was a quantitative study, comprising a nationally representative sample of 3,461 UK adults aged 18 and over, carried out between April and July 2015. The sample was boosted by additional interviews to provide a robust base for analysis in Scotland, Wales and Northern Ireland, and amongst 18-24 year olds, resulting in total sample of 5,603 respondents. The survey was conducted primarily online but to ensure that light- and non-internet users were represented, 26% of interviews were conducted face-to-face.

The data were weighted by age, gender, region, working status, internet usage and housing tenure, to match known UK population estimates. The research was commissioned by the Money Advice Service to inform the development of the Financial Capability Strategy for the UK.

Key findings

Top level findings include:

• Managing money: most people manage their money day-to-day, but around four in ten have room for improvement.
• Preparing for life events: many people are not well prepared for events such as income loss, bereavement or retirement. Only just over one-quarter of the working-age population has a savings buffer equivalent to three months’ worth of income, and only just over half of families have life cover.
• Financial skills and knowledge: there is some evidence that the level of skill and knowledge in the UK adult population has declined over the last decade.
• Financial mindset: barriers to financial capability include confidence, particularly among those aged 18 – 24 and those on benefits, and ‘live for today’ attitudes, which were found among half of all respondents.

Detailed findings:

• The survey used a long and detailed questionnaire, so to bring some structure to the findings, and to meet the objectives of mapping Financial Capability and providing a diagnostic tool, questions were organised into groups. Thresholds were set for each measure and average scores assigned according to the proportion of respondents who had met the thresholds, resulting in eight scores, three of which cover behaviours, and five of which cover Financial Capability.
• Each of these scores was then analysed among a number of sub-groups and, as such, the report also highlights specific issues among groups such as young adults, working age adults, and social housing tenants.

Points to consider

• Methodological strengths or limitations: The survey sample design and weighting are robust. The analysis involves grouping factors together that, inevitably, results in simplification and loss of detail. The groupings and thresholds for in this report are normative; that is, they are based on previously determined understandings of what is important rather than on correlations within the data set. The report notes that further analysis is necessary, and underway.
• Relevance: The research is highly relevant and topical as it informs the development of the Financial Capability Strategy for the UK.
• Generalisability/ transferability: This results of this research can be seen as representative of the adult population of the UK.
• Applicability: The research is applicable to the development of the Financial Capability Strategy in the UK, with the caveat that further analysis is underway, which may supersede or supplement this report.

Full report

Financial capability in the UK 2015 - full report