Numeracy and financial capability: exploring the links

• Context
• The study
• Key findings
• Points to consider
• Full report

Context

The Money Advice Service’s Building Blocks research (2016) and other analyses have identified a relationship between numeracy and financial capability, with notably strong effects on long-term financial security. This report aims to explain the relationship between numeracy and financial capability, and discusses the implications for stakeholders.

The study

The study is based on an analysis of data from the online and face-to-face Adult Numeracy and Financial Capability Survey (2017) of more than 2,000 working-age adults in the UK. This analysis was supported by interviews and a roundtable with stakeholders and experts, a literature review, and deeper analysis of other sources. “Numeracy” was defined as “having the confidence and competence to use numbers and data in everyday life to make good decisions, including financial ones”. The study considered three aspects of numeracy – everyday financial calculations, interpreting financial documents and financial concept calculation – and assigned participants to a numeracy level on the basis of answers to ten questions.

Key findings

• Overall levels of numeracy
  • 25% of participants had “poor numeracy” (0-4 out of 10 items correct), 20% “low numeracy” (5-6 correct), 28% “moderate numeracy” (7-8 correct) and 27% “high numeracy” (9 or 10 correct).
  • Formal maths qualifications were not reliable predictors of numeracy levels.
  • Older people tended to have higher levels of numeracy.
• Relationship between numeracy and financial capability
  • There is a positive correlation between numeracy and financial capability; this is independent of income, housing tenure and other demographic factors.
  • The strongest correlations are with saving behaviour and with being able to manage day-to-day finances.
  • Being able to make everyday money-related calculations was more relevant than being able to understand financial documents.
• The importance of mindset
  • The study allocated the population to one of four quadrants based on higher or lower levels of confidence combined with higher or lower levels of numeracy. These included the “over-confident” (low numeracy and high confidence; 27% of working-age people in the UK) and the “overwhelmed” (low numeracy and low confidence; 7%).
  • Confidence and positive attitudes towards numeracy boosted the effect of numeracy skills on some aspects of financial capability: the “over-confident” performed better than the “overwhelmed” on such aspects as levels of saving and using financial information.
  • In some cases – such as paying more than minimum monthly credit card repayments – the over-confident fared worse.
  • People with higher numeracy tended to have more positive financial attitudes and belief.
  • Higher levels of “persistence” – seeking more/other ways to solve a problem – are associated with higher numeracy.
  • There were no overall differences in confidence on the basis of gender, although there were some on individual aspects.
  • Both confidence and capability tended to increase with age.

Points to consider

• Methodological limitations:
  • The report does not provide full details of sampling and representativity; these can however be inferred from other source reports.
• Relevance:
  • The study is directly relevant to considerations of planning effective interventions to build financial capability.

Full report

Numeracy and financial capability: exploring the links - full report