We need to teach people about money, not just maths

Among UK citizens, financial preparations for later life are falling woefully short. More than half (57 per cent) of those we surveyed last year were concerned about their finances going far enough in retirement, while 50 per cent did not feel they were preparing adequately.

If we are serious about giving people better prospects, I see three key policies that could help solve this problem at source: better financial education, better support for the Money and Pensions Service, and better access to knowledge about how maths can help in real life.

The right financial education at the right time

We must empower younger people to feel more confident about their finances – and, particularly, their pensions.

For a new curriculum to be engaging, relatable and successful, it must take numbers out of the classroom and drop them into their real-world applications

This should begin with basics such as how to manage bills or overdrafts, before introducing three key concepts that can help them make better saving decisions: compound interest, pound cost averaging, and the effect of inflation.

Understanding these concepts – or not, as is the case for many would-be savers – has a huge impact on young people’s ability to make informed decisions as they think about their financial future.

It is crucial that young people understand the rewards of regular saving and, conversely, about the cost of stopping contributions and missing out on the compound interest.

There has never been a more important time to teach young people about the effect of inflation on the purchasing power of every pound they save.

According to the Pensions and Lifetime Savings Association, today’s retirees face living costs 20 per cent higher than last year, meaning they must save more simply to maintain the same living standards.

Improving financial education means reaching as many young people as possible – at the right times or “teachable moments”.

There is plenty of time to learn outside the classroom, particularly on social media, where today’s young people increasingly absorb information. Financial education need not be any different.

Understanding the factors that affect their savings will help young people make the best-informed decisions between now and their retirement. Demystifying industry jargon is a good place to start.

Support the efforts of Maps

To improve financial education, our industry should also do more to support the work of Maps to make an even greater impact.

Financial institutions currently pay a levy to Maps to fund financial education initiatives delivered by the government, such as the “mid-life MOT” and a retirement planning hub that will incorporate the upcoming pensions dashboards project.

These initiatives are a good step towards helping people to take stock of their finances – and are by no means an exhaustive list of Maps activity.

Further funding would enable these fantastic financial education efforts to reach more people than ever. I believe this will be critical as household budgets become ever more stretched.

We need more young people and their families to discuss their financial wellbeing in later life. Not enough families discuss financial matters: our recent research on protecting future finances found that more than half (57 per cent) of parents had not spoken to their children about long-term financial planning, despite 69 per cent of parents feeling responsible for their children’s financial future.

It is time to talk openly about how to save for retirement. Adults, as well as young people, might even learn something they did not know about their pension.

Ensure pupils who struggle with numeracy are not left behind

Finally, if we are serious about providing a better future, then we need to ensure that young people feel confident about managing their money from an earlier age.

Including the practical application of numbers in day-to-day financial decisions should become a universal feature of numeracy education across primary and secondary school curricula.

While this is already the case in some places, only a nationwide rollout will deliver genuine generational improvement.

It is also incumbent on financial institutions to utilise technology to really find new ways of helping people understand their financial situation.

“Meet your future self”, for instance, is an online tool that takes all the complexity of pension benefit statements, removes the numbers, and replaces them with images of your future self. It truly is pensions for the “selfie” generation.

Indeed, digital tools will be increasingly important as more of our lives migrate online. Finances are no different and, despite growing technological literacy, digital exclusion remains one of the biggest barriers to saving for retirement.

Mentioning the dreaded word “maths” sends shivers down the spine of many adults as they recall school numeracy lessons.

For a new curriculum to be engaging, relatable and successful, it must take numbers out of the classroom and drop them into their real-world applications.

The prime minister’s plan for numeracy education could really help address the issues around saving for later life that threaten not just soon-to-be retirees – but our children too.

The best chance for a better curriculum will be to focus more on finance, give Maps more support, and leave no struggling students behind.

Robert Cochran is a senior corporate pension specialist at Scottish Widows