Financial education programmes must overcome people’s emotional and behavioural obstacles rather than just providing cold, hard facts to achieve success, a new study has found. Comment from Nick Throp, Co-founder and Director – like minds.
The research, by communication experts at like minds and leading psychologists and philosophers at the School of Life, found that a general disinterest in financial information, lack of savings discipline and a struggle to see into the future were key barriers to people acting on the transactional information offered by these programmes. The study was based on in-depth interviews and a survey of over 1,000 people and showed there are huge ‘human behaviour’ challenges to be addressed for financial education initiatives to gain a response.
Nick Throp, co-founder and director of like minds, commented: “Behavioural characteristics and emotion play a far bigger role in our dealings with money than we might think. We need to look beyond providing factual information and engage with people before we educate them. After decades of failing to engage people in saving and managing their money into retirement, employers and the financial services industry need to apply more emotional intelligence to their communications. We need a different conversation with people – one that gets them much more inspired and excited,” he said.
One finding from the survey was the division of people’s personalities between “impulsives” and “planners”. These character traits commonly affect attitudes to work, sleep and exercise routines as well as to savings habits, with fewer impulsives than planners actively saving for their retirement. It also demonstrated a huge mental distance between people’s current financial circumstances and those to be faced well into the future – especially in retirement.
However, the study also showed that organisations who help employees with solutions to their current challenges can build a trusted relationship for the future. By encouraging people to develop good micro savings habits they can turn these into bigger successes over time, such as saving for a decent pension.
Alain de Botton, writer, philosopher and founding chairman of the School of Life, commented: “However odd it sounds, a central part of us doesn’t believe we’re going to get old. There are evolutionary reasons for our limited horizons – our distant ancestors had far less certainty about their future lives and the need to plan. But our imagination is an incredible tool and the right habits and rituals, if encouraged, can help this process along.”
The study suggests greater use of three disciplines in reaching out to employees and members: Psychology- to understand how people really think and feel; Philosophy – to give real-life meaning to saving and managing money; Art – to trigger an emotional response through words, pictures and music that stimulates ideas and life-time goals. “Human emotions need to be much more front of mind when designing our financial products and communications with people. Employers and providers have an important role to play here, and can reap the rewards of thinking about financial wellness in a different way.”
