Calls from banking sector for universal financial training
By Martin Kornacki (26-11-2009)
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Organisations should invest in financial training for staff to prevent another crisis in borrowing and personal debt, according to a global financial services company.
AXA corporate benefits managing director Paul McMahon made the comments at a Work Foundation event this week, entitled Recession, Recovery and Improving the UK’s Financial Capability.
According to McMahon too little attention has been given to the demand side causes of the recession.
“Undeniably some lending practices were indefensible,” he said. “But there was consumer demand. The lack of understanding of financial implications is what we need to think about addressing.”
And financial training should be seen as a larger part of improving employee engagement, he said.
In an AXA document that urges the government to do more to aid the take up of financial education, the organisation says there is a clear return on investment in providing the training.
US research, it says, shows that return on investing in financial education is at a ratio of three to one on the basis of reduced employer costs such as lower absence levels due to less financial worry and related stress among staff.
AXA proposes an eight-point action plan that it has presented to government and employers in its Roadmap to Stability document.
Among the recommendations are that government should offer clear monetary incentives to aid the take up of financial education initiatives by employers including a grant for small firms.
If the plans are adopted individuals would also be entitled to attend financial training through their workplace and be allowed up to one hour a month during working hours to spend on personal financial matters.
The question of why people tend to be bad with money was also raised at the event.
According to AXA one reason is ‘hyperbolic discounting’, which put simply is the tendency for people to choose the more immediate option over one that offers delayed gains.
Rather than being rational self maximisers AXA’s report says people are ‘loss averse’ becoming irrational short term gamers acting on instinct and going with the crowd.
According to debt management charity Credit Action total UK personal debt stood at almost £1.5bn at the end of June 2009 while average household debt excluding mortgages stood at between £10,000 and £20,000.
AXA corporate benefits managing director Paul McMahon made the comments at a Work Foundation event this week, entitled Recession, Recovery and Improving the UK’s Financial Capability.
According to McMahon too little attention has been given to the demand side causes of the recession.
“Undeniably some lending practices were indefensible,” he said. “But there was consumer demand. The lack of understanding of financial implications is what we need to think about addressing.”
And financial training should be seen as a larger part of improving employee engagement, he said.
In an AXA document that urges the government to do more to aid the take up of financial education, the organisation says there is a clear return on investment in providing the training.
US research, it says, shows that return on investing in financial education is at a ratio of three to one on the basis of reduced employer costs such as lower absence levels due to less financial worry and related stress among staff.
AXA proposes an eight-point action plan that it has presented to government and employers in its Roadmap to Stability document.
Among the recommendations are that government should offer clear monetary incentives to aid the take up of financial education initiatives by employers including a grant for small firms.
If the plans are adopted individuals would also be entitled to attend financial training through their workplace and be allowed up to one hour a month during working hours to spend on personal financial matters.
The question of why people tend to be bad with money was also raised at the event.
According to AXA one reason is ‘hyperbolic discounting’, which put simply is the tendency for people to choose the more immediate option over one that offers delayed gains.
Rather than being rational self maximisers AXA’s report says people are ‘loss averse’ becoming irrational short term gamers acting on instinct and going with the crowd.
According to debt management charity Credit Action total UK personal debt stood at almost £1.5bn at the end of June 2009 while average household debt excluding mortgages stood at between £10,000 and £20,000.
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