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Financial capability

What is financial capability and why is it important?


Financial capability used to be known as financial literacy.  According to the Financial Services Authority (FSA), financial capability is about: -


• Being able to manage money
• Keeping track of your finances
• Planning ahead
• Choosing financial products, and
• Staying informed about financial matters.


Financial products and services have grown enormously both in their number and complexity over the last 25 years.  At the same time, successive governments and employers have been asking people to take more responsibility for managing their finances.  The ever-widening range of financial choices that people now have to make throughout their lives can be a bewildering experience for many, especially for those who have debts and/or are struggling to meet their financial commitments. 


The FSA’s Baseline Survey found that many people are not equipped with the skills or knowledge needed to negotiate these decisions.  The Government’s National Strategy for Financial Capability, with its vision of “better informed, educated and more confident citizens, able to take greater responsibility for their financial affairs and play a more active role in the market for financial services’”, aims to remedy this situation.  The importance of financial capability has also been recognised by a growing number of statutory, charitable and corporate funders.


Who is financial capability work aimed at and how is it delivered?


In recent years, much financial capability work has been undertaken in schools, colleges and universities with the aim of equipping young people with the financial skills that they will need throughout the rest of their lives.  However, much financial capability work has also been focussed on groups who are especially vulnerable in the increasingly complex financial environment described above.  As well as people on a low income, these target groups include: older people, young single parents, prisoners, probationers and recent ex-offenders, and NEET (not in education, employment and training) young adults.


Delivery methods vary, although financial capability projects usually include a taught element.  In order to be effective, teaching methods need to be flexible and suited to the particular needs of the target client group.  The taught element is often supported with resource materials, some of which are printed and some of which are available on the internet.


What funding streams are out there and how can I find out more about new initiatives?


The FSA has funded a number of financial capability projects in the past.  However, over the last few years more and more funders have become interested in funding financial capability work.  Recent examples of national funding projects include: -


• The Now Let’s Talk Money campaign, funded by the Department for Work and Pensions
• The Energy Best Deal programme, funded by OFGEM
• The Save Xmas campaign, funded by the Office of Fair Trading in the aftermath of the collapse of Farepak, the Christmas hamper company
• The Top Ten Tips for Xmas and Horizons campaigns, both funded by Barclaycard
• Training for frontline advisers on tax and older people, funded by HM Revenue and Customs.


In addition, a growing number of advice agencies have been successful in seeking funding for projects in their local area.
The AdviceUK money advice update, a regular email bulletin, contains information about new funding streams, including those for financial capability work.  However, the best way of finding out about new developments in the area of financial capability is by attending your local Financial Capability Forum.  Initially funded by the Prudential and currently funded for two years by the Bank of America, there are now fourteen regional financial capability fora covering England and Wales.  The fora are supported nationally by Citizens Advice and its Financial Skills for Life team.  Managers and workers from AdviceUK agencies are welcome to attend.  Getting involved with your local forum can also yield financial rewards: in the last couple of years, £800,000 of national funding has been channelled through the fora to forum members.


To find out the location of your local forum, and the date of its next meeting, contact Beth Bell, National Co-ordinator of the Financial Capability Forums at Citizens Advice.  You can email her at beth.bell@citizensadvice.org.uk or ring her on 0115 943 9740.

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