Financial Capability

Financial capability describes the skills, knowledge, attitude and behaviours individuals need to make informed decisions and take positive action about their finances.

At EPIC 360 we also recognise that the skills, knowledge, attitudes, and especially behaviours to make informed financial decisions must be suited to the social and financial circumstances of the people we work with. Our definition of what we do is captured in four headings:

Managing Money
Planning Ahead
Making Choices
Getting Support

We hope that our approach encourages lasting changes in financial behaviours, and improves financial wellbeing, easier said than done;

  • the gyms are full of new members in January and deserted by February;
  • new diets are often started with good intentions before the summer and fall by the wayside;
  • Resolutions and commitments promised and made are regularly broken.

Change isn’t easy, it needs to be manageable, agreed and supported.

Everyone differs, your choices are perhaps not your neighbours or work colleagues, and their decisions might not be yours. How would you react if you were offered you £100 today or £110 in 3 days, what would you take? Most people, apparently, will take the £100 today. How about £100 in 30 days or £110 in 31 days, yes, most people would wait for the £110.

Our person centred financial capability sessions are often about small changes, which can make a big difference. What can people in difficult circumstances, – with their own commitments and concerns – change, adjust, reduce, modify, alter or introduce that they can maintain, that they can recognise as helpful, and can lead to better quality of life.

We settled on our four headings from the many reports and research around the subject including definitions by the Scottish Government and the most recent work undertaken to produce the UK financial capability strategy led by the Money Advice Service and the Office for National Statistics (ONS) Wealth and Assets survey.

The Scottish Government define financial capability as:

  • the motivation to efficiently manage finances and effect change;
  • day-to-day management of finances, for example, effective budgeting and use of a bank account;
  • planning ahead for retirement, other life transitions and unexpected events, for example, by saving;
  • efficient selection of financial products and the ability to understand these products, for example, by comparing repayment costs before taking a loan
  • knowing where, and how, to seek appropriate financial advice.

The Money Advice Service, which has responsibility for developing a new Financial Capability Strategy for the UK, defines financial capability as:

the interaction between internal factors such as ability, attitudes and motivations and external factors, such as the accessibility of financial services”. Their diagram identifies how they see these push and pull factors working. It’s the connectivity of these elements and influences that underpins our work.

Enablers & Inhibitiors

The Money Advice Service found in 2013 that the 17 million UK adults who run out of money before payday are not all on lower than average incomes: around a third of those who earn over £30,000 say they find it tough to live within their means. It’s tough for people regardless of income, but especially tough on those with the lowest income. The majority of people that EPIC 360 financial capability officers meet with are on below average incomes.

Financial capability was captured in the latest Office for National Statistics (ONS) Wealth and Assets Survey against 6 headings, (see sidebar). Only I person in 100 was identified as truly financially capable, there was room for improvement amongst the other 99.

It’s evident that there is crossover between all these definitions and survey evidence. Financial capability is complex, complicated, and never as easy as having someone give advice or tell you what to do.

Life gets in the way of good intentions, and good advice, and we are all capable of making for ourselves decisions that affect our finances that others might or might not make, even with all the information and knowledge at our fingertips.

EPIC 360 will work with people to address many of the issues raised in day to day lives, covering income, budgeting, saving, planning, and considering appropriate financial products and services that can enhance people’s lives.

For some people we meet that might be one session, for others it might be all six of the sessions that we offer.

ONS Wealth and Assets Survey

Financial capability was captured in the latest Office for National Statistics (ONS) Wealth and Assets Survey against 6 headings, or as they called them, “dimensions”.

Extensive survey work with individuals across a range of incomes was undertaken and scores examined.

Those with the highest incomes scored well in choosing products and making ends meet, but not in planning ahead. Those with lower incomes scored the lowest overall, but did well in money management. The scores were:

  • Planning ahead. (score of 2.3 out of 10)
  • Having organised money management. (6.7)
  • Making ends meet. (7.0)
  • Controlling spending. (6.7)
  • Staying informed. (3.2)
  • Choosing products. (6.6)

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