Financial wellbeing is a hot topic now recognised as a public policy issue, not simply a matter of personal responsibility. The UK’s renewed focus on financial education – including plans to build it more firmly into school curricula from 2028 – is therefore welcome. But it also raises a question: how do we make sure financial education is done well?
In recent years we have moved away from traditional ideas of financial wellbeing and now appreciate that it is always subjective. We define it for ourselves through how money relates to our own values, how we relate to financial matters, and how this relationship affects our overall well-being. By building strong foundations at a young age, we can help the next generation manage both their financial and overall well-being much better. That translates into better outcomes for individuals, communities and the wider economy.
For too long, the default approach has been ‘financial literacy’: teaching young people concepts and terminology, and assuming that knowledge translates into better decisions. The evidence from behavioural economics and financial psychology suggests a more complicated reality. People often know what they should do, but still struggle to do it – particularly under stress when money is tight. That is why the real goal of financial education should not be a list of facts, but the capability and confidence to engage with money when it matters most.
Financial literacy to self-efficacy
To deliver financial education that will have a positive impact and lead to good outcomes – financial and overall wellbeing – we need to focus on the skills and mindsets that support greater self-efficacy, a belief that we can successfully engage with financial matters even when they become more difficult to manage.
Without the psychological skills that underwrite self-efficacy, the ability to engage with financial information for a positive outcome is limited. Knowledge alone is not enough if a young person lacks the confidence to apply it or avoids money decisions altogether. Money is emotional, bound up with identity, status, security and belonging. It can trigger avoidance, shame, denial and short-term thinking – often driving the worst outcomes.
Building financial self-efficacy is the difference between a teenager being able to define ‘interest’ and being able to make a calm decision when their bank balance is lower than expected. When we empower young people to develop these skills at the right ages, we give them the best possible opportunity to achieve their own financial wellbeing.
Teach what’s relevant, at the right time
A common mistake in financial education is teaching content that is technically correct but psychologically irrelevant. Teaching a 15-year-old about a mortgage is counterproductive when they are unlikely to engage with that decision for a decade or longer. Timing and relevance should be at the heart of any financial education programme. What we can do, instead, is help that 15-year-old build the confidence to engage with that kind of situation when the time comes.
Programmes must take account of cognitive abilities at each age and use engaging and fun ways of teaching that progress learning year by year. It is essential programmes are age-appropriate, inclusive, and build capabilities such as:
- decision-making and problem-solving under uncertainty
- recognising ‘spending triggers’ and marketing pressures
- confidence to ask for help early, rather than avoid or hide problems
Measure what matters
Financial education must be properly measured for effectiveness over the short and long term. Given the high value we place on children’s wellbeing now and in the future, it is important that we measure, assess and evolve programmes, with a clear eye on outcomes.
Those outcomes should always focus on how financial education enhances an individual’s financial and overall wellbeing, as they perceive it to be. Teaching complementary skills such as financial mindfulness and defusion techniques can help young people define their relationship with money and the value it has in their life – reducing anxiety and increasing agency.
These are challenging tasks, but they will enable financial education to move past traditional methods that have failed. The real prize is producing young adults who feel capable, calm and in control when money gets complicated – because sooner or later, it always does!
By Adrian Pryce DL, Chair at Be. Partners Ltd
By Cameron Waldron, Lead Consultant in Financial Psychology at the Financial Wellbeing Lab
For more information, contact Adrian Pryce at adrian@bepartners.org or find out more at the Financial Wellbeing Lab.
