Financial education programmes must not just provide cold, hard facts to achieve success, they must overcome people’s emotional and behavioural obstacles, a new study has found.
The research, by communication experts at Like Minds and psychologists and philosophers at the School of Life, found disinterest in financial information, a lack of savings discipline and a struggle to forecast future needs were key barriers to people acting on the transactional information offered by traditional financial education programmes.
The study was based on in-depth interviews and a survey of over 1,000 people and showed there are huge ‘human behaviour’ challenges to be addressed for financial education initiatives to gain a response.
Nick Throp, co-founder and director of Like Minds, said: “Behavioural characteristics and emotion play a far bigger role in our dealings with money than we might think. We need to look beyond providing factual information and engage with people before we educate them.
“After decades of failing to engage people in saving and managing their money into retirement, employers and the financial services industry need to apply more emotional intelligence to their communications. We need a different conversation with people – one that gets them much more inspired and excited,” he said.
One finding from the survey was the division of people’s personalities between “impulsives” and “planners”. These character traits commonly affect attitudes to work, sleep and exercise routines as well as to savings habits, with fewer impulsives than planners actively saving for their retirement.
It also demonstrated a huge mental distance between people’s current financial circumstances and those to be faced well into the future – especially in retirement.
However, the study also suggested that organisations who help employees with solutions to their current challenges can build a trusted relationship for the future. By encouraging people to develop good micro savings habits they can turn these into bigger successes over time, such as saving for a decent pension.
Alain de Botton, writer, philosopher and founding chairman of the School of Life, said: “However odd it sounds, a central part of us doesn’t believe we’re going to get old. There are evolutionary reasons for our limited horizons – our distant ancestors had far less certainty about their future lives and the need to plan. But our imagination is an incredible tool and the right habits and rituals, if encouraged, can help this process along.”
Jonathan Watts-Lay, a director at Wealth at Work, a provider of financial education, guidance and advice in the workplace, said financial education effective financial education should be tailored to the needs of the individual.
"Whether they are starting their career and facing the challenges of saving to buy a first home, are in the midst of their career and balancing work and home life, or starting to give consideration to what retirement may look like.”