Why does financial literacy matter to achieve inclusive cultures?
The Covid-19 pandemic has had an enormous impact on most aspects of our lives. Many young professionals have lost their jobs or have been unable to find a role after graduating.
Covid-19 has also been an eye-opener about how widespread and steep inequalities are. According to a report by digital financial coach Claro, individuals from the lowest incomes and people with a disability were most likely to be negatively impacted in their personal finances by Covid-19.
The research also showed that 20% of UK households had a high dependence on their primary source of income. If they lost it, they would have to borrow money or move within two months.
That is why financial literacy matters. Understanding and effectively using financial skills, like budgeting, saving and investing, are key to have a good relationship with money.
Yet, these skills also are connected with access to opportunities.
Women are impacted by a lack of financial knowledge.
There is a significant gender difference when it comes to financial literacy. Many reports show that women display lower financial literacy and confidence than men, leaving them at a potential disadvantage.
This disadvantage becomes more worrying if you also consider that Covid-19 impacted women more than men, with women losing their jobs at a faster rate than men, according to the Pwc Women in Work Index 2021.
Furthermore, the Global Financial Literacy Excellence Center found that several factors put women at higher risk of having financial problems than men. For example, women have a longer life expectancy, shorter work tenures, lower earnings, and career interruptions due to child-rearing.
That is why more women should have access to tools and opportunities to learn basic financial concepts.
Ethnic minority groups are more likely to struggle financially due to Covid-19.
COVID-19 had a disproportionate economic impact on Black, Asian and minority ethnic (BAME) groups. An analysis by TUC found that unemployment among these groups was more than three times the rate of white unemployment.
This situation meant a potential higher dependency on using savings to cover current expenses like rent and bills, confirmed by the Financial Conduct Authority.
In addition, studies have shown that people from ethnic minority groups tend to use fewer financial services and products. Why? There is a lack of trust in commercial banks that can deepen the financial exclusion of BAME communities.
So, what can be done to address these barriers? Financial education.
Championing initiatives that aim to increase financial inclusion among the BAME community can level the playing field.
Young people are also financially vulnerable.
Figures from the Office for National Statistics show that young people account for nearly two-thirds of job losses since the pandemic. In most cases, young professionals rely more on a steady paycheck to cover their expenses. So, losing their job could mean losing their only source of income.
What is also concerning is that Claro’s report found that 1 in 6 individuals in younger groups had not been able to save money in 2020, and they appeared to be lacking in financial literacy.
Having financial knowledge could be the difference between learning how to save, making a budget and diversifying income streams and depending on a job that could be lost at any point.
Considering the economic impact of Covid-19, it becomes clear that young professionals need financial skills that allow them to build responsible financial behaviour.
This is why financial literacy matters.
At LMF Network, we believe financial know-how should be available to everyone. It is a life skill that will have a positive impact on people’s futures.
Empowering people with basic financial concepts and skills is essential to further the financial inclusion of marginalised communities. How else would individuals make good decisions about saving accounts, investment opportunities, or borrowing?
However, financial literacy is a journey, one that needs the best partner. That is why we have partnered with Claro, a digital financial coach that wants to help you achieve your goals.
Through our partnership with Claro, we want to provide our community with the tools needed to achieve your financial goals like detailed spending analysis, saving and investing.
Claro can also help boost your financial confidence with one-to-one financial coaching, handy guides, budget planners and more.
Learn more about the Claro x LMF Partnership here.
This blog contribution was made by Alejandra Chávez and Eleonora Papini.
Alejandra is a Communications and Public Affairs Consultant with 7 years of experience passionate about helping organisations tell their stories and engage with their stakeholders. She has a master’s degree in Public Administration and Management from University College London.
She is also a politics, policy and current affairs nerd, a book lover and an amateur photographer.
Since March 2021, Alejandra is Press and Communications Officer for LMF Network (London).
Eleonora is originally from Italy, she is passionate about human psychology, sustainable development and international cooperation. Eleonora works as a Project Implementation Officer in a European project about urban sustainable development solutions aimed at valuing the young and female entrepreneurship industry.
In 2021 became also a Data Analyst for the LMF Network and content creator for their blog.
How can you keep in touch?
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What is LMFnetwork?
The LMFnetwork is a global social enterprise (not for profit) focused on empowering, enabling & educating womxn and marginalised groups into tech, entrepreneurship & digital. We specialise in designing and delivering accessible programmes and supporting a global community. We’ve gone from a brunch club to a social good brand based on what the community wanted. We are a real community run by real people.
Resources:
- The Claro Mental Health Project Report Into The Link Between Money And Mental Wellbeing. 2021.
- Financial Lives 2020 survey: the impact of coronavirus. FCA. 2021.
- Women in Work Index 2021. Pwc. 2021.
- The Gender Gap in Financial Literacy: A Global Perspective. GFLEC. 2017.
- BME unemployment is rising twice as fast as white workers during a pandemic. TUC. 2021.
- Ethnicity, personal finances and Coronavirus. FCA. 2021
- Growth through financial inclusion. Deloitte. 2021.
- Labour market overview, UK: March 2021. Office for National Statistics. 2021.
