Improving individuals’ financial knowledge, skills and behaviours
Submitting InstitutionUniversity of Bristol
Unit of AssessmentGeography, Environmental Studies and Archaeology
Summary Impact TypeEconomic
Research Subject Area(s)
Economics: Applied Economics
Commerce, Management, Tourism and Services: Banking, Finance and Investment
Summary of the impact
The Personal Finance Research Centre (PFRC) at the University of Bristol
conducted research between 2004 and 2006 to develop the UK's first
quantitative baseline survey of financial capability. The survey was a
significant departure from previous methodologies in that it not only
assessed knowledge, but also skills and behaviours. The survey results
became the basis for the Financial Services Authority's (FSA)
understanding of financial capability in the UK, and PFRC's analysis of
the survey findings were used to set priorities for its National Strategy
for Financial Capability, worth £90 million. One of the findings of the
survey was that young people are much less financially capable than their
elders. As a result, a priority within the National Strategy was to
educate young people. A number of programs were put in place including Learning
Money Matters, which offered free advice, support and resources to
schools between 2006 and 2011. The program successfully reached over 2
million young people in 4,259 schools, and in 2011 economic wellbeing and
financial capability became a statutory part of school curriculum in
England. Overall, the FSA strategy was deemed successful, exceeding its
target of reaching 10 million people. International bodies regard the
FSA's baseline survey as a model for their own work and the UK methodology
has been adopted by countries including Ireland, Canada and the
Netherlands. The World Bank has led a substantial research and evaluation
programme in low and middle income countries that uses the UK approach.
Nature of research insights/findings
In 2004, the Personal Finance Research Centre (PFRC) won a competitive
tender to develop a baseline measure of financial capability for the UK's
Financial Services Authority (FSA), which included generating a survey
questionnaire to capture the complex construct of financial capability.
The concept of financial capability developed from financial literacy and
as a result, previous surveys had focussed largely on testing people's
knowledge, with little attention given to skills or behaviours. However,
PFRC's research showed that financial capability was a multi-dimensional
concept, which encompassed four different domains: managing money,
planning ahead, making choices and getting help . It also highlighted
the importance of assessing people's financial apability in the context of
their socio-economic environment .
PFRC also designed a survey methodology to capture information about
consumer attitudes and behaviours in relation to the four domains of
financial capability. A social research agency, TNS- BMRB, used the
questionnaire and methodology to conduct a national survey of the UK adult
population. The survey was a significant departure from previous
methodologies in its comprehensive approach and was the first quantitative
baseline survey of financial capability in the UK. In a review of the FSA
in 2007, the National Audit Office found the survey to be "comprehensive
and professional" putting the UK "ahead of its international peers in
financial capability" [a].
PFRC was subsequently commissioned by the FSA to analyse the survey data
in order to create a scoring mechanism to identify people's relative
strengths and weaknesses in the four financial capability domains, as well
as to describe the types of people most likely to display higher or lower
levels of financial capability. The results of the analysis [2, 3]
established a baseline measure of financial capability in terms of how
well people: make ends meet; keep track of their finances; plan ahead;
choose financial products; and, stay informed about financial matters.
Overall, the survey revealed a picture in which many people from all
backgrounds and all levels of income lack the ability to manage their
The results provided rich and complex data, from which four main themes
- Large numbers of people, from all sections of society, are not taking
basic steps to plan ahead, such as saving sufficiently for their
retirement or putting money aside for the future.
- Over-indebtedness is generally not a problem that affects a large
proportion of the population, but for those who become over-indebted the
implications can be severe. Many more people may find themselves in
trouble in an economic downturn.
- Many people are taking on financial risks without realising it,
because they struggle to choose products that truly meet their needs.
- The under-40s, on whom some of the greatest demands are now placed,
are typically much less financially capable than their elders, even
allowing for their generally lower levels of income and experience in
dealing with financial institutions.
The FSA was especially concerned that financial capability is weakest
among younger age groups, even allowing for their relative inexperience in
dealing with financial institutions. In particular, it was felt that the
lack of financial capability in planning ahead could be storing up
potential problems for the future.
What the underpinning research produced
In addition to the two FSA research reports [1, 2], the Centre has
authored research reports based on its financial capability work for the
Consumer Council for Northern Ireland (2007), the Basic Skills Agency
(2007), Genworth Financial (2008) and the OECD , as well as one
peer-reviewed academic paper . PFRC also conducted qualitative research
for the Irish Financial Regulator, to test and adapt the UK approach to
the Irish population [b]. In addition, PFRC used a similar approach to
conceptualise legal capability in a study carried out for Law for Life:
the Foundation for Public Legal Education, which was funded by the
Ministry of Justice [c].
Kempson, E. (2004-2006) Measuring financial capability and levels of
financial capability in the UK, Financial Services Authority,
The developmental study to design the baseline survey ran from December
2004 to February 2005, with fieldwork for the baseline survey undertaken
between July and September 2005. The research has been developed and
published in various forms between 2005 and 2010.
Conceptualisation, development and analysis of the survey was conducted
entirely at the University of Bristol by: Sharon Collard (appointed 1998),
Professor Elaine Kempson CBE (appointed 1998), Andrea Finney (appointed
2007), Adele Atkinson (appointed 2004, left 2010), Professor Stephen McKay
(appointed 2005, left 2007).
References to the research
 Atkinson A., McKay S., Collard S., Kempson E. (2006) Levels of
financial capability in the UK: results of a baseline survey.
Consumer Research Report 47. London: Financial Services Authority (144
 Atkinson A., McKay S., Collard S., Kempson E. (2007) Levels of
Financial Capability in the UK. Public Money and Management 27
(1): 29-36. DOI 10.1111/j.1467-9302.2007.00552.x.
 Kempson, E. (2010) Framework for the development of financial
literacy baseline surveys: a first international comparative analysis,
OECD. DOI 10.1787/5kmddpz7m9zq-en.
Details of the impact
One of the four main objectives of the FSA was to promote public
understanding of the financial system. In 2003, the FSA launched a new
initiative to develop and implement a national strategy for financial
capability. This included the establishment of a Financial Capability
Steering Group, which identified seven priorities to be explored by a
series of specially convened working groups. In the 2004 progress report,
the FSA stated that it would commission a comprehensive baseline survey to
establish the current state of financial capability in the UK, which would
also be used to inform the evaluation of individual pilot projects set up
within the strategy.
Nature of the impact
In designing and analysing the financial capability baseline survey, PFRC
has made a significant contribution to national policy. The baseline
survey was used by the FSA to "inform its priorities for the national
strategy and its wider regulatory work to help retail consumers achieve a
fair deal [a, pg 52]. The FSA's strategy covered the period 2006-11 and
was worth £90 million [a, pg 51]. The strategy was deemed successful: it
exceeded its target of reaching 10 million people and changed the way
policy-makers think about financial capability and its role in UK society
[d, pg 8].
Based on the baseline survey findings, the FSA targeted interventions and
consumer communications at specific demographic or socio-economic groups
[e, pg 12]:
- The survey showed that young adults are the least financially capable,
yet they face great financial responsibilities. In response, the FSA
delivered Learning Money Matters [e, pg 6], where between
2006 and 2011 free advice, support and resources was offered to schools
and teachers. The program successfully reached over 2 million young
people in 4,259 schools [f]. Evaluation of Learning Money Matters
found that personal finance education had a positive impact on students'
attitudes to saving and borrowing and their confidence in dealing with
- Economic wellbeing and financial capability were incorporated into
Personal Social Health & Economic (PSHE) education. Though PSHE
remains outside the national curriculum (non- statutory), the Department
for Educations provides guidance and end of key stage statements
specific to financial capability for key stage 3 and 4 as part of the
Secondary National Curriculum [h]. The guidance for teaching financial
capability in the secondary curriculum for key stage 3 and 4 refers to
output 2 to help define what the guidelines are trying to achieve [i,
- The Money Doctors scheme focused on young people in higher
education. Two-thirds of students (65%) said they had taken action to
improve their financial situation or planned to do so as a result of
attending a face-to-face Money Doctor's financial advice session
- New parents were also targeted through the Parents Guide to Money.
Early evaluation showed that two-thirds of new parents had taken action
to make a positive change to their financial situation within three
months of receiving the Guide. [k].
- As part of its strategy to address the financial capability deficits
identified in the baseline survey, the FSA set up a £12 million Money
Guidance Pathfinder to deliver financial guidance to the UK public
on a range of personal finance issues. Over 220,000 people were helped
by the Pathfinder in a 12 month period. Evaluation of the Pathfinder
found that nearly three quarters of users took action to improve their
financial situation after using the service [l]. The service was
subsequently rolled out nationally through the Money Advice Service
(used by 1.3 million people in 2011/12 alone [m]).
Reach of the impact
The methodology developed by PFRC to measure financial capability has
since been adopted by other countries. The Financial Regulator of Ireland
commissioned the PFRC to carry out qualitative research to adapt the UK
survey to the Irish context prior to a national survey of financial
capability in Ireland [b]. Canada [n], Australia [o, pg 12] and the
Netherlands [o, pg 12] have also used and adapted the UK approach. The
approach has also been adapted for use in the emerging area of public
legal education, to conceptualise domains of legal capability and thus
provide a framework for the future delivery and evaluation of public legal
Kempson has conducted work for the Organisation for Economic Co-operation
and Development on the survey measurement of financial capability, with
the aim of establishing robust and comparable international data .
The World Bank selected and used the empirical approach developed by PFRC
in a substantial research and evaluation programme in low and middle
income countries in Africa, Latin America, the Middle East and Asia
Pacific regions [p]. Collard and Kempson were advisers to the World Bank
on this project, and Kempson was lead author of the final programme report
[p]. The World Bank programme furthered the conceptualisation of financial
capability by incorporating psychological traits into the measure
financial capability; provided much-needed evidence on the effectiveness
of different financial education initiatives; and produced a Toolkit for
the evaluation of financial education to help improve the evidence base.
Sources to corroborate the impact
[a] National Audit Office (2007) The Financial Services Authority: A
Review under Section 12 of the Financial Services and Markets Act 2000.
[b] Financial Regulator (2009), Financial capability in Ireland: An
Capability An Overview.pdf>.
[c] Collard, S., Deeming, C., Wintersteiger, L., Jones, M. and Seargent,
J. (2011) Public Legal Education Evaluation Framework. London: Law
[d] Money Advice Service (2013) UK Financial Capability Strategy:
Call for evidence. London: Money Advice Service. <https://www.moneyadviceservice.org.uk/files/the-money-advice-service-
[e] Financial Services Authority (2006) Financial Capability in the
UK: Delivering Change. London: FSA. <www.fsa.gov.uk/static/pubs/other/fincap_delivering.pdf>.
[f] Personal Finance Education Group (2012) Learning Money Matters
for Secondary Schools.
[g] Spielhofer, T., Kerr, D. and Gardiner, C. (2009) Evaluation of
Learning Money Matters (LMM). Slough: NFER. <www.nfer.ac.uk/nfer/publications/LMM01/LMM01.pdf>
[h] Department for Education (25 Nov 2011) Personal, social health
and economic education (PSHEE): Economic well-being and financial
economic> [Accessed 21.05.13].
[i] Department for Children, Schools and Families (2008) Guidance on
financial capability in the secondary curriculum: key stage 3 and 4.
[j] London South Bank University (undated) Evaluating the impact: The
Money Doctors approach to student financial guidance. London:
Consumer Financial Education Body.
[k] IFF Research Limited (2008) Parent's Guide to Money.
(Consumer Research Report 63). London: FSA. <www.fsa.gov.uk/pubs/consumer-research/crpr63.pdf>.
[l] Consumer Financial Education Body (2010) The Money Guidance
Pathfinder: Key findings and lessons learned. London: CFEB. <www.bris.ac.uk/geography/research/pfrc/themes/advice/pfrc1003.pdf>.
[m] Money Advice Service (2012) Annual Review 2011/12. London: Money
Advice Service/ <https://www.moneyadviceservice.org.uk/files/mas-annual-review_2012.pdf>.
[n] McKay, S. (2011), Understanding Financial Capability in Canada.
Prepared for the Canadian Taskforce on Financial Literacy <http://publications.gc.ca/collections/collection_2011/fin/F2-213-
[o] Mundy, S. (2011) Financial capability: Why is it important and
how can it be improved? CfBT Education Trust, Nairobi, Kenya. <www.cfbt.com/evidenceforeducation/pdf/FinancialCapability.pdf>
[p] Kempson, E., Perotti, V. and Scott, K. (2013) Measuring financial
capability: a new instrument and results from low- and middle-income
countries, World Bank.