Context

The Money Advice Service established the ‘Money Lives’ programme to provide a new and more nuanced understanding of what financial capability really is and how it is influenced in order to identify ways to improve it.

While previous research has identified financial capability as being largely skills-based, the programme revisited definitions of financial capability in light of the growing recognition of the significance of behavioural factors. As such, the Money Advice Service wished to develop and test a broader definition of financial capability which incorporated behavioural factors. The research aims to unpack automatic and more reflective (that is, deliberate) financial behaviours to inform how households might be enabled and encouraged to manage money better.

The study

The Money Advice Service commissioned Ipsos MORI to undertake research to understand adults’ automatic and reflective financial behaviours in relation to a wide range of aspects. These included people’s life aspirations, their emotions, how they manage, think and talk about money, how (far) they plan for the future financially, how they cope with and respond to unplanned events and the cultures and contexts influencing them. A particular objective was to explore the adequacy and representativeness of the Financial Service Authority’s definition of financial capability. As such, the three overarching objectives were to:

• Explore the types of influences on people’s money management;
• Design and pilot test interventions for improving money management approaches; and
• Understand the factors that make interventions effective.

Primarily qualitative in nature and covering all four nations of the UK, the methods comprised:

• Longitudinal research via participant-led depth interviews and researcher observation with a cross section of 72 families, from four three-hour home visits over nine months.
• Development and evaluation of five pilot interventions which targeted specific automatic behaviours with these participants.
• 48 hour-long in-depth interviews with individuals recently experiencing a major life event.

Key findings

• • The research confirmed the relevance and validity of a model which identifies skills, knowledge, attitudes, motivation and opportunity as influencing capable behaviour.
  • The research also identified that the ability to plan ahead is crucial for determining effective money management.
  • The ability to plan is ingrained in people’s underlying attitudes that are often learned early in life.
  • Preparing for and dealing with key life events can trigger positive long-term money management habits.
• • Among the longitudinal participants exposed to interventions, two of the interventions – substitution of expensive items with cheaper purchases and the use of a budgeting tool to help people work towards a financial goal – were more effective than the others.
• The targeted interventions were most effective when:
• People had clear and positive outcomes to aim for.
  • Experienced positive feedback and measureable progress (for example, participants valued being able to monitor the most conspicuous aspects of their goals and receive regular information about their progress).
  • Felt compensated (for example, emotionally or socially) despite spending less.
  • People could access key information that supported good financial decision-making and helped them practice personal self-control, which had an empowering and self-reinforcing effect.

Points to consider

• Only three families withdrew from the research part way through. The report does not indicate how the data was analysed so it is difficult to assess the robustness of the results. As the authors acknowledge, the interventions were piloted only on small samples and over a limited period of time; a robust assessment of their impacts would require a much larger scale study.
• There is a lack of information about how the data was analysed, and mention of the findings being ‘illustrative’ only, would tend to imply that the results are not transferable or generalisable. However, a good range of participants by a range of characteristics suggests the samples reflected a broad cross-section of the UK population.
• The Money Advice Service’s ‘Money Lives’ programme informed the development of the UK Financial Capability Strategy, which was launched in October 2015.

Full report

Money Lives - full report