The last decades have been marked by a combination of low savings rates and high debt levels, especially in the US and UK, which both have economies largely based on consumption, the housing market and the expansion of personal debt. This is highlighted by the 2008 UK Office for National Statistics report into the nation's economic well-being, which showed that 13 million adults have no financial savings or investments. It is difficult to divorce the current financial crisis from this short-term approach.
The time has come to rebuild the savings culture – to reject the credit card in favour of the piggy bank, and it is for governments to cultivate an environment that encourages this. This should be addressed urgently through the reform of pensions and benefit systems in order to restore the social and economic benefits of a low time preference culture.
In addition, savings products and financial advice need to be priced transparently, with consumers either choosing to pay for advice on a time basis or clearly stated annual commission basis. ACCA supports increasing financial knowledge for consumers. It is important that high quality financial and commercial awareness and individual responsibility are embedded in the education process; consumers must be helped to understand the importance of planning their financial affairs.
Additionally, skills and education must be looked at holistically rather than in small isolated segments. Financial institutions must reciprocate by making sure that their products are understandable and transparent for consumers and finally, the consumer must take more responsibility for what he or she is agreeing to.
There are many things that people do without reading the fine print – from installing new computer software to agreeing to terms and conditions when buying something small online – but taking out a large loan or tying yourself into a mortgage without understanding what you will be required to pay back should not be one of them.
The time has come to rebuild the savings culture – to reject the credit card in favour of the piggy bank, and it is for governments to cultivate an environment that encourages this. This should be addressed urgently through the reform of pensions and benefit systems in order to restore the social and economic benefits of a low time preference culture.
In addition, savings products and financial advice need to be priced transparently, with consumers either choosing to pay for advice on a time basis or clearly stated annual commission basis. ACCA supports increasing financial knowledge for consumers. It is important that high quality financial and commercial awareness and individual responsibility are embedded in the education process; consumers must be helped to understand the importance of planning their financial affairs.
Additionally, skills and education must be looked at holistically rather than in small isolated segments. Financial institutions must reciprocate by making sure that their products are understandable and transparent for consumers and finally, the consumer must take more responsibility for what he or she is agreeing to.
There are many things that people do without reading the fine print – from installing new computer software to agreeing to terms and conditions when buying something small online – but taking out a large loan or tying yourself into a mortgage without understanding what you will be required to pay back should not be one of them.
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