Financial capability: Staying informed, choosing products
By Marianne Curphey
When it comes to choosing financial products, we all want the best deal, but how many of us do all our research to ensure we get it? That would include comparing offers, staying on top of financial news and the state of the economy, and being patient as we shop around. According to a recent report, many Brits fail to do these things, leading people to choose products that aren't the best for their situation.
The report from the Office for National Statistics (ONS) measured financial capability based on six categories: organised money management, planning ahead, making ends meet, controlling spending, staying informed and choosing products. Only 1% of those surveyed scored highly on all six dimensions.
How do Britons measure up?
This is the second installment in a three-part series on financial capability. Check out the rest of the series:
Part one: Money managing and planning skills.
Part three: Making ends meet and controlling spending.
In a short series of stories, UK.CreditCards.Com is examining each category and what steps you can take to eventually improve your financial skills. Our first piece analysed managing money and planning ahead; this one tackles staying informed and choosing products.
The ONS defines staying informed as "the extent to which someone keeps up-to-date with changes in the wider economy". According to the data, participants scored lowest in this category. Participants did better overall at choosing products -- defined as "the sources, if any, someone uses when buying a financial product that most influence their purchase" -- but only those with medium-high incomes scored well.
Additionally, the government is seeking advice from consumers on what difficulties they face in finding, using and understanding financial product information, which will go into a Financial Advice Market Review to be published in spring 2016. The review comes after significant changes to the UK pensions regime highlighted the need for people to seek advice on what to do with their retirement savings.
Polishing up on your money skills can lead to better overall financial health and could save you some money in the long run.
How to improve
Simonne Gnessen, money expert with Wise Monkey Financial Coaching, says the first step in staying informed is to take an interest in financial news and not be afraid to chat about money matters with friends.
"You could begin by reading the money pages of the weekend newspapers and paying attention when financial news comes on the television," she says. She also recommends signing up to weekly emails from financial advice websites, which will "drip feed" financial tips and information to you in jargon-free language. You can also try podcasts, such as the BBC's Money Box on Radio Four, which has in-depth discussions of financial news and new products.
"Just having these messages appear in your in-box, even if you don't actually read them, will be reminding you about money and getting you to think about financial issues," she says.
When you're ready to choose products, Jasmine Birtles, Money Expert at Money Magpie, suggests using online comparison sites. Additionally, she says, you should take stock of your current financial products at least once a year -- every six months if you can manage it. This includes your bank account, credit cards, insurance and utilities.
"Often people are motivated to look around and change accounts or products if they suddenly realise that the rate they are paying on their card or overdraft is particularly high," Birtles says. "Or it might be after they have fight with their bank about service or charges and they decide they want to move their business."
Staying on top of your products is a good way to avoid nasty surprises. For instance, if you have a card with a limited low-APR period, you should make a note in your calendar or set a reminder on your phone about three months before the terms end to look around for a new deal.
"It can take a month or two for an application to be approved so you want to be prepared," Birtles says.
Finally, don't forget to take advantage of customer service representatives. Birtles suggests that before you make an application for a 0% balance transfer card, call and see what your chances are of getting the deal before you go through the formal application process.See related: A guide to debt advice organisations, Credit card demand means better products, more approvals, How can you improve your financial literacy?
Published: 18 August 2015
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