FT: Study finds few Britons are "financially savvy"

FatherAbraham

Only one Briton in 100 is truly financially savvy, according to research by the Office for National Statistics (ONS) into people’s ability to manage their money.
The ONS asked adults taking part in its Wealth and Assets Survey about how well they made ends meet, planned ahead, knew how much they spent from day to day, controlled their spending, stayed informed on economic matters and shopped around when they chose financial products.

Read more at: http://cc.bingj.com/cache.aspx?q=study+finds+few+Britons+financially+savvy+site%3aft.com&d=2941867210298&mkt=en-GB&setlang=en-US&w=LKKk6Ju-pAxva7lRZk9H-yUnmY4q9FOn#axzz3e0tASziI

ONS original report, Financial Capability in Great Britain: http://www.ons.gov.uk/ons/dcp171766_407816.pdf?format=contrast

ONS pensions-specific report, Early Indicator Estimates from the Wealth and Assets Survey: http://www.ons.gov.uk/ons/dcp171766_407959.pdf?format=contrast

Warmest regards,
FA

jamesd

It appears that their definition of what it means to be financially savvy needs major reworking. It looks more like "financially savvy people of limited means" than truly financially savvy.

"Organised money management:

The extent to which someone knows how much they spend day to day. A highly capable person on this dimension knows, to within 1 or 2 pounds, their bank balance or the cash they have available for everyday spending."

Knowing your bank account balances to within £2? How often you check them? Pointless except with low balances and low transaction rates. Why would I care when I know that I have ample, check often enough and have standing orders set up to cover the outgoings from each account, so I could be in hospital incapable for months and everything would just tick along smoothly. There was a time on benefits when I did have to track this with some care but that's not the case now.

I can't even claim to be financially savvy at making ends meet because I don't have more in savings than I owe in consumer credit at the moment. Having enough money in investments to pay off my mortgage and all other credit seems not to make me savvy because it's not in savings. And they really should have a chat with our host about having as much money in savings as in credit, so he can tell them that it'd often be better to use the savings to pay off the borrowing, so their measure is lack of savvy, not savvy, in many cases.

At least I'd probably score well on planning ahead and controlled spending. Well, unless they have some weird definition other than being able to provide for all of my financial needs for the rest of my life and accumulating it in less than ten years.

Oh dear. They do have a weird definition of controlled spending. To get high marks you have to agree that you'd rather save up than buy something on credit. Guess that rules out all stoozers and those who want section 75 protection as well as those who know they can get free to use money from 0% for purchase credit cards or cashback and make money from spending on them.

Overall I'm pretty pleased that some of their scores are quite low, it may show that the population is more financially savvy than their questions are.

I think I'll stick to not being financially savvy in ONS terms and just being good with money instead.

atush

Why not do a study on how many journalists are financially savvy enough to write finance articles properly?

kidmugsy

How financially savvy does one have to be to be invested in print journalism, an industry dying on its feet?

FatherAbraham

jamesd wrote: »

Oh dear. They do have a weird definition of controlled spending. To get high marks you have to agree that you'd rather save up than buy something on credit. Guess that rules out all stoozers and those who want section 75 protection as well as those who know they can get free to use money from 0% for purchase credit cards or cashback and make money from spending on them.

Stoozers?!

This isn't 2006 any more!

Warmest regards,
FA

N1AK

FatherAbraham wrote: »

Stoozers?!

This isn't 2006 any more!

Tell that to the £6k debt I've got sitting interest free on a credit card tyvm

It does seem like this survey makes some very odd assumptions about what financially savvy means. I couldn't typically say what my current account balance was to within less than +/-£2k let alone +/-£2!

atush

I get cash, and plenty of free stuff with my CCs and no interest paid. May not be stoozing, but I like it.

jamesd

FatherAbraham wrote: »

Stoozers?! ... This isn't 2006 any more!

I've in excess of £30,000 of credit used for stoozing at the moment.

Savings account interest rates are lower but still can be profitable given the length/cost of some deals. I normally use investment-based stoozing and that can be far more profitable for those who can accept the risk.

In 2010 I included this note to accompany an interest only mortgage application from one of the fussiest lenders around:

"The credit card debts are for stoozing, borrowing at 0% and placing the proceeds in offset accounts, savings or investments. ... . I estimated in April that I made a profit of about £12,000 from this activity in the 2009-10 tax year."

Knowing from history that it was very likely that early 2009 was a good buying time and then using leverage turned out to be quite profitable for me. No guarantees but you probably know the historic performance of the cyclically adjusted P/E in projecting likely future stock market returns.

These days I'm using a mixture of traditional investments, P2P and to a lesser extent mortgage offset and savings accounts. I almost always have existing customer lending offers available as well as any new ones I seek.

Last week I invested a few thousand Pounds at a bit under 15% annualised for five months via Ablrate. Small UK business buying shipping containers from a Chinese maker that had already sold on 60% of them. Secured on the containers (when made) and order. 10-12% is what they more typically expect, all secured deals. Too soon to say what their default and collection rates will be.

Just using savings accounts is less lucrative than it used to be but there's still plenty of money to be made.

michaels

FatherAbraham wrote: »

Stoozers?!

This isn't 2006 any more!

Warmest regards,
FA

Hmm - I have a 300k mortgage costing 2.5% fixed earning 3% for my DW who doesn't work so tax free. I guess the £1500pa profit is imaginary money

FatherAbraham

michaels wrote: »

Hmm - I have a 300k mortgage costing 2.5% fixed earning 3% for my DW who doesn't work so tax free. I guess the £1500pa profit is imaginary money

JamesD was talking about about credit cards, which have a somewhat different repayment structure, and are unsecured. After all, you do need to possess real estate which was worth at least £300k plus deposit at the time you took the mortgage in order to swing that deal.

Stretch the definition of stoozing if you wish (it's arguable that JamesD has too, since his investment of borrowed money, whilst historically profitable, is laden with risk, as he acknowledges), but then it will cease to have any meaning.

Warmest regards,
FA

patanne

What does it actually matter how much money is in your bank today? Surely what is more relevant is how much is in there the night before your next pay goes in. Now THAT I could tell you to the penny (always supposing I spend all my budgets of course).