BLOG: Why it’s good to talk (about money)
This week is Talk Money Week which encourages people to have an open conversation about their personal finances.
With today’s market offering lots of choice, it can leave customers confused about the products that are right for them. One issue we at Freedom Finance found is that there is lots of choice, but a real lack of clarity in the market.
Our research finds nearly half (45%) of adults across the UK feel that the process of making personal finance decisions makes them overwhelmed and anxious.
As a result, a third (38%) of people are regularly delaying or not making important financial decisions. We call this personal finance paralysis, which is a fear of making a bad decision, so the decision is delayed or not made at all.
Personal finance paralysis has real consequences – a failure to switch to a better mortgage rate, consolidate a credit card or personal loan costs UK consumers £18.7bn per year – an astonishing £1,598 per adult.
Despite being the most internet savvy, young people are twice as likely as baby boomers to suffer from personal finance paralysis – 26% of Generation Z and 50% of Millennials regularly put off making personal finance decisions, compared with 22% of Baby Boomers.
Better clarity and communication could help alleviate anxiety and confusion for customers. Seven in 10 people across the UK said they want more clarity from financial services providers about which financial products they qualify for and which are right for them. Four in 10 consumers want simple terms and conditions to understand how the loan or product works, or how much is repayable.
Personal finance providers should support customers, encouraging open discussions about money, so individuals are empowered and well informed on what they’re signing up for.
For example, having simple language in terms and conditions and explaining industry terminology, like APRs, helps customers choose well. This helps remove the stigma associated with hiding certain financial circumstances, as customers are better informed over the options available to them.
The industry must help tackle the issues by supporting customers with personal finance conversations and decision-making. By increasing communication and providing relevant guidance or education, it’s likely to influence positive decision-making and discussions.
Other personal finance providers need to consider how their products and services influence conversations about money, and work together to support and educate individuals, while removing unnecessary options, jargon and complex language.
Brian Brodie is group chief executive at Freedom Finance