The Salary Calculator

Personal finances in the digital age

by Madaline Dunn

There’s no escaping the fact that technology has revolutionised personal finances. We’re currently in the depths of the digital era, where almost everything finance-related has a tech element. It’s helped people streamline everything from bills to budgeting, with mobile phones acting as a personal finance hub in people’s pockets.

This week, at The Salary Calculator, we’ll explore the different ways tech and digital have transformed our personal finances for the better…and worse, including:

• Automation in personal finances
• How your phone can act as a personal finances hub
• How people are learning about finances through new mediums
• What the future holds for digital personal finances

Automating personal finances

Gone are the days of bankbooks, paper bill bank statements and cheques (for the most part). These days, with an internet connection, you can access a wide range of automated personal finance services. This has led to a significant reduction in the number of bank branches across the UK; recent figures show that, since January 2015, the number of banks and building society branches that have closed, or have scheduled to close, is 5,579.

Automation comes in a range of forms, including:

• Automatic bill payments,
• Automatic fraud alerts,
• Bookkeeping: What began with Excel has morphed into more modern accounting tools such as Xero, QuickBooks, FreshBooks and Zoho Books, which streamline and simplify bookkeeping.
• Automatic savings and emergency funds,
• Automatic retirement and investment contributions.

That said, it’s important to note that automation is not without its downsides, and some warn against the increasingly popular “set it and forget it,” approach arguing that “out of sight” becomes “out of mind,” and that when you’re not required to engage with your spending habits, you may forget about a monthly service you’ve signed up for. However, in the digital age, there’s an app for that too; Emma, for example, allows you to see all your subscriptions in one place, and get rid of the ones that are no longer useful to you. There are other risks though, too; for example, automated finances can lead to you becoming overdrawn and incurring fees; it’s also true that you can miss potential errors and signs of scams.

Your phone as a personal finances hub

In 2023, phones are more advanced than they’ve ever been, and it’s no wonder, considering that technology has been growing exponentially, doubling every one and a half to two years since the 1960s. Of course, the technology’s evolution has come with a raft of apps to simplify day-to-day life, and give you more control over and confidence in your finances.

Research from Plaid found that these days, people in Britain use an average of three fintech apps to manage 67% of their money online. According to the study, the majority of those using the apps feel confident in their usage of technology to manage their money, perhaps explaining why the number of online services usage is set to increase by 25% in the coming six months.

Some of the most popular personal finance apps include:

• Money Dashboard – This app is considered a bit of a pioneer in the personal finance management world. It’s a free app which helps you keep track of your personal finances and spending by pulling in information from your online banking accounts, keeping it all in one place. It allows you to view and categorise your spending, review your spending activity, set budgets and pay cycles, and track your subscriptions. It’s also FCA regulated.
• Splitwise – Perfect for household finances; if you live in shared accommodation, are planning a holiday trip, or dining out with a group, this app allows you to add different bills, keep track of money-owed, do the number-crunching, and make sure bills are settled – which will be a relief for those who hate excel spreadsheets.
• Chip – If you’re looking for a stress-free way to save, Chip is often highlighted as a good go-to. It utilises AI to gauge how much you can affordably save based on your typical spending habits. It also doubles up as an investment app, and allows access to a curated selection of funds from some of the world’s biggest asset managers. This brings us on to our next point…

Not only do phones allow you to keep track of purchases, spending, and budgeting, you can now access investing on the go. Research shows that, at this stage, people even prefer to invest via their phones. Brokerchooser.com research, for example, revealed that 53% of people in Britain now choose to invest this way; although it also highlighted that the majority of mobile investors are beginner investors. The Royal Mint, which recently conducted a study into the investment habits of young people, has also found that around 80% of young people are now investing. Nutmeg, InvestEngine, and eToro are cited as some of the most popular investment apps in 2023.

TikTok as a math teacher

As recession looms, the cost of living crisis cripples, and inflation and interest rates balloon, it’s never been more important to be in-the-know about personal finances; and considering that finance education is still lagging behind in traditional education settings, more and more people are turning to the internet for financial education and advice.

With around two-thirds of young people citing a “lack of financial education” as one of the primary reasons that led them into debt, it’s no wonder that more people are trying to enhance their financial literacy. Research from Tommys Tax even shows that currently, as many as 60 per cent of people choose social media, specifically, as their primary tool for accessing financial advice and information. Right now, one of the popular social media platforms for this comes in the form of “FinTok,” the financial side of TikTok, populated by so-called ‘Fin-fluencers.’

It’s important to note that while this is undoubtedly a great starting point for equipping yourself with the tools you need to take control of your finances, it shouldn’t be your only source, and not all information you find on “FinTok,” and the like will be reliable, or, indeed, advisable. There are no educational or professional requirements when it comes to wearing the ‘Fin-fluencer’ hat, and views are profitable, meaning that while it can be a great source for personal finance information, there are also a lot of sensationalist videos.

Some helpful FinTok content creators include:

• Humphrey Yang of @humphreytalks
• Taylor Price of @pricelesstay
• Seth Godwin of @seth.godwin

It’s also worth noting that around 14 million people in the UK have a low digital capability, and a staggering two million households are struggling to pay their internet bills; so digital access is still not at the level it should be.

Taking digital one step further

While the personal finance world is nearly unrecognisable from the one that existed just ten years ago, more change is afoot, and digitalisation and evolving technology will continue to change the landscape. Experts predict that AI and blockchain will have more of a presence in finance automation and organisation. Further, with continued inflation and the rising cost of living, which unfortunately, shows no sign of slowing, predictions are that more people will seek out additional revenue streams through digital currencies. Brands are also increasingly adapting their payment processes to these digital currencies, too and some commentators predict the further merging of cash and crypto.

Likewise, a recent study by Link, predicted that cash payments are likely to fall to as little as 10 per cent of all UK transactions in the next 15 years. That said, recent research has also shown that paper cash reached a 13-year high amidst the cost of living crisis, so it appears paper money is here to stay, at least for the time being.

Elsewhere, some believe that, despite the MetaVerse being in its infancy and experiencing a number of challenges and failures, it will eventually have more of an impact on personal finances. For example, we are already seeing digital “property” ownership, and metaverse cryptocurrencies.

Tags: Financial education, fintech, investment, Pensions, savings

Personal finance education in the UK

by Madaline Dunn

Although personal finance is now an educational requirement in the UK, it’s well known the curriculum around this topic is not up to scratch. Many leave school without a real grasp on the ins and outs of personal finance, whether that’s interest rates, mortgages, or managing money, and as a result, research shows this leaves youngsters vulnerable to making harmful decisions around their finances.

Financial literacy empowers people to make informed choices about how, when and where they spend their money, and ensure they’re not left open to unsustainable borrowing, and unwise investments that could lead them down a road of debt.

At The Salary Calculator, we’ll explore why education around personal finances in the UK needs to improve, and the consequences of financial illiteracy.

A lack of financial literacy and its consequences

According to research, we begin to develop “vital money habits and skills” between ages three and seven. Despite this, only around 38% of children and young people receive some form of financial education while in school, and in 2016, half of Brits failed a financial literacy test run by the OECD, placing Britain significantly below France, Norway and Austria.

The consequences of this lack of financial literacy, means that young people are largely unprepared to deal with the different financial situations they are confronted with as they move into adulthood.

Research from Santander UK has even found that two-thirds of young people attribute their debt problems to a lack of financial education. Meanwhile, an inquiry commissioned by the Centre for Social Justice (CSJ) in partnership with Lowell, found that 24 million adults are not confident handling their money on a day to day basis, and one in eight young adults who took on a “buy now, pay later” credit agreement were eventually contacted by a debt collector.

Speaking about what the Santander UK study shows, Mike Regnier, CEO of Santander UK, said that fostering key money management skills at “an early age” will ensure that future generations leave school “equipped with the foundations for financial independence, and the skills to make better financial decisions.”

Meanwhile, John Pears, UK Chief Executive at Lowell, said that now, more than ever, with the cost of living crisis reaching extreme levels, financial literacy would be a “strong barrier.” Pears admitted that as a country “we just aren’t good enough at it,” and outlined that the company’s own customers have outlined how “ill-prepared” they are when facing debt. He added: “The lack of financial literacy and budgeting skills creates spirals of debt that are hard to break and have a long-lasting impact, individually and on our economy.”

Education around personal finance should start at school

The CSJ and Lowell conducted a poll of 4,000 adults and found that 44% of all adults, and two-thirds of those aged 18 to 34, believe that if they had received financial education, for example around basic money skills, they would be more financially prepared for life and its challenges. Yet, in the 2021-22 Young Person’s Money Index report, just 8% of young people said they received most of their financial education at school.

Yet, according to Fintec, when children receive education around finances at school, they’re more likely to handle their finances better, save up frequently, have a bank account and generally feel more confident navigating finances.

Speaking about the advantages of educating children about finances from a young age, Martin Lewis, the founder of MoneySavingExpert.com, said that children are “professionals at learning.” He added: “Teaching children is easier than teaching adults. That’s why, in our education campaigns, we focus on children –  because the job of educating society is so much bigger. If you start with children and keep doing it over 30, 40 years, you’re going to work through [society] better.”

Programs and initiatives to enhance education

Back in 2014, financial education was brought into the secondary school curriculum, as a component of the “citizenship” element of the national curriculum at key stage 3 and 4. This was introduced as a way of providing students with guidance on managing money, and tools to plan for their future financial needs.

However, despite being compulsory, uptake of financial education in schools is actually quite low. According to Russell Winnard, a former teacher and head of programmes and services at Young Money, there is room for improvement in this area. In 2017, he outlined: “It is compulsory in every secondary school, though that does not apply to academies and free schools. Around 35% – 45% of schools were actually delivering financial education in 2014. Two years on and we estimate it’s still only 40% doing so.”

This is something that has been echoed more recently by Martin Lewis who expressed similar sentiments. Speaking to Future Learn, Lewis said: “There is financial literacy on the national curriculum, but it’s guidance rather than compulsory for many schools. It’s only on the curriculum for secondary schools in England. We have a charity called Young Money where we have a free financial education textbook in every school now, and that’s been incredibly successful, but we still have a problem that some schools don’t teach it, aren’t trained to teach it and won’t.”

To tackle the financial education gap, a number of recommendations have been made by CSJ. Some of these recommendations include:

• Introducing a new legal requirement for students to receive “at least three ‘experiential’ financial learning lessons” over the course of their school career;
• A new ‘whole-family’ approach to financial education. According to the report, this would involve bringing in parents and carers into the equation, and introducing what the CSJ called community infrastructure like Family Hubs;
• Bringing in funding for care leavers and disadvantaged young adults to attend ‘just-in-time’ financial education programmes to reduce cases of rent-arrear driven homelessness;
• Introducing adult financial education as part of the Government’s £560 million adult numeracy scheme, ‘Multiply’;
• Completing of the welfare reforms initiated in 2012 by rolling out ‘Universal Support’ to provide vulnerable people with digital and financial skills;
• Promoting the ‘Help to Save’ scheme to increase uptake among those who are eligible.

Commenting on the changes that need to be implemented, Robert Halfon MP, Education Select Committee Chair, said: “We must be bolder – critically, by adding financial education to the curriculum in primary school in PHSE lessons where money management remains absent in England. Adults of all ages also need opportunities to develop critical financial skills throughout their life, whether that be in the workplace, further education or via the welfare system.

Tags: Economy, Finances, Financial education, Managing money, Personal finance