If people were better at managing their money the UK could be better off by a whopping £108 billion, a new report from the Money Advice Service reveals today.
This is a huge number. It's so big it's difficult to get your head around. But it would certainly mean we'd all have a lot more money at our disposal.
Over the next 30 years, improving how people deal with money could add £20 billion to our collective savings, boost our pensions by £10 billion and add another £50 billion to our investments.
Debt would be less of a factor too, with the number of those over-indebted falling by 13%, bringing with it improved health and quality of life. As a result of larger bank balances, spending would go up by close to £30 billion, helping the economy.
So how do we get there? Well, that's the focus of Financial Capability Week.
For people to better manage their finances, they need to improve their skills and confidence with money, making them what's called "financially capable".
What makes someone "financially capable"?
There are some basic behaviours displayed by people with higher financial capability.
- Shopping around for deals to make money go further
- Understanding compound interest
- Saving regularly
- Reducing impulse spending
Though you might feel confident with some of these, you might not feel able to say you could do them all.
It's easy to overlook how a lack of financial education can affect our day-to-day dealings with money.
Money Advice Service research has shown one in five aren't able to read a bank statement, while three in 10 people never openly discuss their finances with anyone.
As a result, there are around eight million people experiencing problems with debt, and four in 10 adults have less than £500 available to cover an unexpected bill.
How to improve your money knowledge, confidence and motivation
Though there's a big part to play by the financial and education institutions, such as banks and schools, there are three activities you can try yourself.
Boost your money knowledge
If there's a topic you don't understand – like compound interest – you can read simple guides on the Money Advice Service website. Even the most complicated topics should be easy to understand, but just pick a couple of subjects you wish you knew more about and have a read.
Increase your money confidence
A budget can help you keep track of where your money goes and monitor your bank balance – meaning you're able to spend and save with a better understanding of your financial situation. It's actually really simple to pull one together using an online tool like the Money Advice Service Budget planner.
Find your money motivation
When you're saving, setting a goal makes the task much easier. It could be for a holiday, an engagement ring, perhaps even your retirement. But knowing where that money is going is a great way to keep you saving and stop you spending on other less important things.
This article is provided by the Money Advice Service.