Increasing financial inclusion and financial literacy

Both financial inclusion and financial literacy were discussed as potential issues for decreasing child poverty levels locally.

Access to basic bank accounts was a real problem for many low-income families. Mainstream banks were often seen as reluctant to service these communities, and accessible post office card accounts have many limitations, such as not allowing direct debit payments to be made. Getting families onto direct debit payments for bills was regarded as essential in reducing the poverty premium. On top of this, the move to monthly universal credit payments is expected to make access to banking facilities essential.

Access to credit union accounts was therefore regarded as a critical part of any attempt to reduce family poverty locally. However, many credit unions were keen to stress that they did not have the capacity to be the magic bullet for the problem of financial exclusion. Many credit unions suggested that they needed to enhance and develop their business models to ensure their viability and ability to assist affected families. One of the key ways discussed was to secure investment from corporate partners to ensure they can provide the necessary services. Local authorities may be able to assist in encouraging this investment. Another was to work with local authorities and RSLs to see if the costs of ‘jam jar’ accounts can be spread across partners.

Outside of access to banking facilities, financial literacy was also described as a potential issue, especially as universal credit will usually be paid monthly. To address this:

  • some RSLs were looking to recruit money managers on staff to ensure their tenants had access to any budgeting advice needed;
  • some youth services were also being targeted as ways of supporting young people to learn about budgeting and encouraging saving;
  • some credit unions also have a track record of providing budgeting advice, and were seen as good potential partners in delivering financial literacy training.

However, it was often stressed that some of the best budgeters are low-income families, because they know where every penny needs to go. There was not meant to be an implicit trade off between providing budgeting support for families and addressing issues of simply not having enough money to make ends meet.

Beyond access to banking facilities and financial literacy, many partners we spoke to were concerned that local authorities were selling debt on to debt collection agencies, which meant bailiffs were making collections. Many voluntary sector and credit union partners were keen to encourage local authorities not to regard loans made to residents as a priority debt.

Salford Credit Union

Salford credit union has established collection points in a number of primary schools in the city. These are run by volunteers (usually parents or friends of the school) who organise regular collections (usually on a weekly basis) where pupils come and pay their savings in. Each child has a savings book so they can keep track of their money. They usually come to the credit union office once or twice a year to take out their savings, often for a holiday or for Christmas. We have heard lovely stories of children being paid small amounts of money by their parents for small jobs around the house, which they then pay in to their savings. A ‘savings bank’ at their own school gives them a good start in learning about the value of money and having control over their own money.

The credit union is working with other schools to set up new collection points and hope to have them available across most schools that want them over the next year.

With thanks to Sheila Murtagh, Chief Executive Officer, Salford credit union