Latest posts by Lara Dugdale (see all)
- 5th Annual Financial Innovation Summit - 02 Nov 2016
- Chris Macdonald left Brooks Macdonald wealth management - 25 Oct 2016
- Are women better finance bosses than men? - 27 Sep 2016
A new report from cross-party think tank Demos finds that a lack of coordination between sectors involved in financial services provision and advice is stymieing attempts to address the problem of financial exclusion.
Banking for All reveals the tremendous scale of the challenge, with 1.5 million British adults without a bank account, and thousands more building up problematic debt and falling prey to pay day loans each year. The report explains that many ordinary Britons also simply lack the financial and digital know-how to manage their money effectively.
Financial exclusion can be a vicious cycle, as the under-banked miss out on deals that are only available online or through direct debit payments (such as energy bills, mobile phone contracts and internet plans), and often struggle to access the credit needed to make investments, such as buying property, or the financial products to help them plan and save for the future.
Those wrestling with problematic debt are also at risk of being unable to take out a mortgage or purchase a car in the future, and there are both short- and long-term implications for wellbeing and mental health, relationships and employment.
Banking for All reflects the findings of a consultative process Demos has conducted, with the support of Lloyds Banking Group, over the first half of 2016 – bringing together politicians, civil servants, and representatives from commercial banking, credit unions and charitable organisations (including housing associations, financial education providers, debt advice charities, and food banks)to explore how financial exclusion might be tackled in a more coherent, coordinated way.
These consultations revealed a consensus of urgency to tackle financial exclusion and improve financial literacy – particularly because the historically low interest rates reduce savings incentives, discouraging households from accruing the ‘buffers’ they need in place to absorb financial shocks.
The move to Universal Credit, which will be distributed through bank accounts, could also prove problematic for those currently without them. What’s more, the fact it will be paid monthly, in arrears, rather than weekly, and that housing support will be paid directly to tenants rather than landlords, will require welfare recipients to manage their money more effectively. So too will changes to student maintenance grants mean many young graduates will leave university with larger debts to handle.
Commenting on the findings, Charlie Cadywould, Researcher at Demos said:
“Everyone should have the opportunity to keep their money safe, to set it aside for a rainy day and to borrow carefully and affordably to invest in their future. Expanding access to financial services can be a huge help those struggling to get by.
“A huge part of the answer is helping people to manage their money effectively, to understand all the different options for saving and borrowing, to access impartial advice, and make informed decisions. Preparation for this can start at an early age and help should continue to be available throughout adulthood.
“To make this happen, we need a coordinated effort: banks, credit unions, charities, schools and government all need to work together to ensure everyone is equipped with the tools to manage their income and spending, to get the best deals and borrow and save most effectively.”