Dealers are being urged to address the lack of financial education among their youngest employees, as a new study reveals its impact on the mental wellbeing of young adults in the UK.
Research published in the Mental Health Project, from digital financial coaching app Claro, has found that there is a direct link between levels of financial confidence and mental wellbeing. Average mental wellbeing scores drop by more than 37% from those with high financial confidence compared to those with the lowest.
According to the study, more than a third (39%) of employees do not keep a budget to track their incomings and outgoings, and 41% reported to be living beyond their means at some point over the last 12 months. This is leaving almost millions of workers in a precarious financial position each month.
Those in younger age groups (18-34), in particular, appear to be lacking in financial literacy. The average financial literacy score among this group is 16.5% below the UK average score, meaning many are starting work without the basic skills required to manage their finances.
Stacey Lowman, financial coach at Claro, said: “While it is important to improve the financial education provided to children in schools, there are millions of young adults beginning employment without the necessary knowledge to manage the income they earn. This is creating a troublesome situation that can impact both mental and physical health.
“Employers should be encouraged to include coaching and training in their employee wellbeing initiatives to avoid these kinds of situations. Poor mental health costs employers due to staff absences and productivity, so investing in this serves both the employees’ and employer’s needs.”
Addressing financial education and mental wellbeing is even more important coming out of the pandemic, according to Lowman. In the last 12 months, she said 29% of UK households reported that their income did not cover their outgoings. In addition, those who witnessed a negative financial change reported mental wellbeing scores to be 15.5% lower than the national average.
Claro’s research found the majority of UK adults do not have a good understanding of basic financial concepts. For example, 64% do not understand the impact of inflation on their money and 52% do not understand how compound interest works. Whilst changes can be made in the education system, the company believes this alone will not tackle the low levels of financial literacy in adults across the UK.