In the midst of a challenging economic landscape characterised by soaring inflation and interest rates, millions of Britons find themselves cast financially adrift, unsure of where to turn for guidance.
Equipped with the rudimentary numeracy skills obtained during their school years, an overwhelming majority of people feel unprepared to deal with finances from the age at which they leave school, a survey from Santander found.
Furthermore, a recent survey of school teachers for the Financial Times found that 40 per cent of educators were unaware of their legal requirement to teach financial literacy to all children.
The culmination of this leaves Britain as a mid-ranking OECD nation for financial literacy, placed just ahead of the likes of Albania and Thailand, and alarming estimates from Allianz indicate that this knowledge deficit costs British households just shy of £3,000 annually.
While financial illiteracy has been a persistent issue, the current squeeze on personal finance has made its consequences more conspicuous than ever before.
Yet amidst this financial turmoil, as with many of the world's most pressing challenges, the ever-evolving world of technology has emerged with a potential solution.
If harnessed correctly, technology, particularly artificial intelligence, has the capacity to provide a lifeline for individuals navigating turbulent financial waters.
Despite the growing hesitance surrounding its application, AI is ground-breaking and holds the potential to transform banks and financial institutions into hubs that proactively educate their customers.
The cost of financial literacy
In advanced economies such as the UK, there is often an unspoken assumption that individuals' financial difficulties are solely the result of their own behaviour or lack of control.
This assumption places the entire burden of financial responsibility on the individual and discourages them from seeking assistance or advice from financial institutions.
It is a sentiment rooted in fear, and current statistics paint a revealing picture whereby 88 per cent of Brits lack confidence in their own financial abilities, and when they do reach out to their lenders, 44 per cent find themselves confused, according to research by Freetrade.
The complexity of the modern economic landscape only compounds this issue. It is marked by ever-fluctuating interest rates, rising mortgage repayments, and a proliferation of financial products shrouded in cryptic fine print and unfamiliar jargon.
Adding to the challenge, the closure of high street banks has left a significant portion of the population without in-person access to assistance, with approximately 5,355 banks and building societies having closed or planned to close since 2015 across the UK.
Beyond the explicit economic cost of financial illiteracy, there is an increasing threat that trust is lost in financial advisers and the institutions that seek to provide quality advice to clients.
As the consumer duty has shown since coming into effect in July, all evidence points to financial institutions bearing an increased responsibility and accountability in checking in more regularly on their customers and ensuring that their understanding extends beyond mere comprehension at the point of sale for financial products such as mortgages, credit cards, auto loans, and personal loans.
