By Monica Kalia, co-founder and chief strategy officer, Neyber
Financial exclusion is widespread in the UK today. According to Neyber’s 2016 research, The DNA of Financial Wellbeing, one in six people in the UK struggles to identify the balance on their bank statement and one in three is unable to manage a budget.
Employers are suffering from the knock-on effects. Neyber’s research found that seven out of ten employees spend up to a fifth of their time at work worrying about money. Around 17.5m working hours are lost each year due to financial stress – that’s an average of more than three days per year for each of the 5.5m businesses in the UK*.
Technology is opening up new ways of helping people who are financially excluded. Greater support for financial education, and access to products such as affordable loans at low or no cost to the employer, means that it’s becoming easier than ever for businesses to play an active role in ensuring their staff don’t suffer financially.
The battle against financial exclusion is now being taken up at government level. A recent report by the House of Lords Select Committee on Financial Exclusion, Tackling financial exclusion: A country that works for everyone? drew on evidence from industry, third sector, regulatory and government sources, to explore the scale of the problem, its causes and potential solutions.
Its findings highlight the challenges faced by those who are financially excluded. The poorest are hit hard by ‘poverty premiums’ – paying more for services such as utilities and credit – and banks are failing to support the most needy.
It also concluded that employers have a direct interest in the financial wellbeing of their staff and the workplace is an ideal place for providing access to financial education. Perhaps that’s not surprising as work is most people’s source of day-to-day income, helps them to build their savings for the future in the form of a pension and often supports them in developing new skills. Neyber asked the Committee last year to recommend that employees in UK businesses are given a statutory right to free financial education at work, as well as access low-cost loans that could be repaid through salary deduction.
Supporting employees’ ongoing financial capabilities will benefit both individuals and businesses in the long term. Poor financial literacy compounds financial exclusion. That in turn has an effect on productivity for UK businesses and ultimately the economy as a whole. At a time when individuals are being expected to take greater responsibility for their own financial futures, the effects of not tackling financial exclusion today could last a lifetime.