As a sector we talk about financial inclusion, capability, literacy and education. But none of these are goals in their own right – they should all be seen as a means to achieving better financial health for individuals, their families and communities.
We think that financial health is about your money working well for you, rather than being a source of stress or having a negative impact on other areas of your wider wellbeing. Better financial health increases social and economic inclusion and mobility, creates greater opportunities for personal and community development, and improves overall wellbeing. So whilst we will continue to work towards increased financial inclusion and capability, we want the Financial Health Exchange to highlight what really matters; achieving real improvements in people’s levels of financial health, today and in the future.
It’s easy to assume that changing people’s behaviour is the answer to improving their financial health. But just as with physical and mental health, the environment in which we live and work has a powerful impact. We believe that often it’s the way the wider organisational landscape is designed which causes many of the financial health problems we see. Sometimes it’s a lack of appropriately designed products and services; Direct Debits work well for someone with a regular salary, but less so for anyone on an unpredictable income. Sometimes it’s ill-thought through policy; the social landlord sector routinely gives less than 5 days notice to new tenants to move in, furnish a property and start paying rent, despite knowing they are among the most financially excluded and vulnerable people in our society. Or a desirable policy that fails due to a lack of training and support for staff to implement it; I’m asked all too often to help someone open a bank account because the branch staff refused them for not having a passport or driving license, despite each bank having a financial inclusion policy to accept alternative ID.
Whilst we firmly believe that financial capability is crucial, we also believe that diagnosing the causes of financial harm correctly will lead to better solutions and more efficient use of resources. Why teach 2 million people on unpredictable incomes to use Direct Debits they cannot reliably honour, when millions more would benefit from a new type of payment mechanism that gives the user greater control over when and how much to pay? So we want to focus thinking on systemic causes, helping every sector to understand how it shapes the financial health environment and then improve its impact.
Read the third blog in this series, What can you expect from the Financial Health Exchange?