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One in five not financially capable says ONS

Room for improvement – that’s the verdict on the UK’s money management skills after an examination into our day-to-day household budgeting.

The Office of National Statistics uses six criteria to measure the idea of being ‘financially capable’ – the ability to make informed decisions and take positive action about our money – and scores the answers from one to 10.

Only one in 100 people score high on all six categories, while one in five scored poorly on all of them.

You can break down the figures in any number of ways (age, location, income), but what’s clear across the board is we’re not great at planning ahead and staying informed.

If they sound like areas you struggle with, we’ve some ideas to help you up your skills.

Get better at planning ahead

This is really about how good you are at putting some money aside, either for a rainy day or something expensive you haven’t got enough cash for.

For a lot of people it’s more a case of not having enough to save than choosing not to. But unexpected bills can really hit hard if there isn’t a buffer. Borrow to cover those costs, or to pay for something big like a holiday, and it can be easy to slide into a debt spiral.

If you want to avoid getting in that situation, there are some things you can do now.

First make a budget. That might sound a little scary, but there are tools to help you do the maths, such as our Budget planner tool. This will help you work out everything you spend and all the money you have coming in. From there see if there are purchases you can cut back on, or cut out completely. You’ll be surprised how easy it is to find a few quid here and there.

As long as you are still covering all your bills, try to put aside this new found money into a separate savings account. Just £3 a day will add up to more than £1,000 in a year.

An easy way to stay informed

This is about how well you keep up to date with changes in the wider economy, from inflation and interest rates to tax and beyond.

You might not think those issues relate to you, but they can all have a big effect on how much things cost and how much money you take home from work. Another big problem is all the jargon that seems to be all over the financial news.

One way to keep on top of things is to keep reading this blog! Either bookmark it as a favourite, or sign up to the Money Advice Service’s fortnightly newsletter.

What are the other financial capability categories?

The other four categories scored much higher for most groups, though there are always ways you can improve your skills.

  • Making ends meet 
    • This measures how well you live within your means. If you can make your money last until the end of the month and keep up with the bills that’s a good sign.
  • Organised money management 
    • If you know your bank balance or the cash you have for everyday spending, you are probably doing well here.
  • Controlled spending
    • This is mainly about not spending now when it could leave you in financial trouble in the future.
  • Choosing products
    • If you shop around, and check best buys or reviews, that’s a good sign you are financially capable when choosing products. Comparison tables are also handy here.

How do you think you’d fare against these six categories?

What do you think?

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  • jane pringle / 21 March 2016

    ideal guide for those in primary school - to a pensioner like myself it is simply patronising - you say nothing useful - but probably spend significant amounts of tax payers cash to do it
    If all the risible government guides such as this were scrapped we could afford a tax cut

  • Sandra / 14 July 2015

    Why can't the budget planner be printable. I can only access the web in the library, and don't feel comfortable having personal details with me. If printable I can work out numbers at home, in private.

  • Daryl / 13 July 2015

    I know where every penny of my money goes and believe me 'It goes'.

  • leslie barrett / 13 July 2015

    I think-
    1. Your message is really hard to read BECAUSE you are using a sans serif typeface and BECAUSE you are using a light typeface so please
    2. try using a more readable typeface such as Times Roman 12point

  • Neil / 12 July 2015

    Any advice that can help will be a benefit and a good reminder.

  • Dave / 29 June 2015

    I seem to manage okay on my £75 per week benefit so why can't other people cope? I know exactly where each penny of my money goes but unfortunately I am unable to save anything at the end of the month as I have nothing left