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Column: Financial stress is costing us dearly – it's time for proper education in money matters

Did you know that financial stress is costing Irish business over €2.1 billion? Financial advisor Liam Croke discusses the changing face of personal finance – and personal debt – over the past 24 years.

Liam Croke

I HAD A client who wanted to buy an engagement ring for his beloved. He told me how financially insecure he felt because he had no savings whatsoever, he was always in his overdraft at the end of each month.

He was paying €500 each month towards a term loan with his bank that still had five years to run. His fiancé had a credit card debt of €13,000 and worst of all because their finances were so bad, his elderly father was paying the crèche fees each month for his only child.

He told me the rule of thumb (apparently) was to pay three months’ salary; I told him that that wisdom came from De Beers in the 1930s who wanted to sell more diamonds. I was advising him financially, not romantically.

The problems with ‘received wisdom’

Here is another truth, received ‘wisdom’ does not equal financial sense. We found that in a recent survey, 44 per cent of us will ask friends and family for received wisdom.

From 24 years of working with organisations and clients, I have advised people who were in great financial shape and helped those who had got themselves into severe difficulty. Over the last five years, I have seen more people in financially stressful situations.  I suspected that this is a hidden epidemic, so did some research.

Did you know that financial stress is costing Irish business over €2.1 billion? On any given day, 557 of us will not be at work because of financial stress and everyone else will spend at least 37 minutes worrying about financial issues. In our professional lives, 57 per cent of us see this stress affect our work.

Financial education

While these statistics are striking, they are really only half the story.  Over the last 24 years, I have advised organisations and clients on how to better manage their money and make the most of what they have. But there is one issue that fundamentally goes to the heart of the stress we are seeing now – financial education in the workplace or lack thereof.

In the UK, financial education will be part of the secondary school curriculum from September 2014. They recognise that young people’s lives are much more complex than they used to be, because they have far more choices, lots of financial products to choose from and they are being exposed to all of this at a much younger age. So, it has never been more important that they are given the tools, confidence and know how so they can exit feel they are in control of their money.

So, what happens to people who don’t get any financial education at home or in school, who go through our educational system and on to University? I have found that a person who graduates with a degree, but has little financial education often falls far behind a person who is financially educated, with or without a college education.

A vicious circle

I have met many college graduates deeply in debt from personal loans. What then happens is that many of these graduates are so anxious to get a job that when they do; they get into even deeper into debt. That is the price of having a good education but no basic financial training. A high paying job without financial education often means the person gets into debt faster than someone with a low paying job but who is financially more intelligent.

Over the last 24 years, we have seen time and time again, how successful and intelligent people make bad financial choices because they lack the knowledge to inform themselves. The financial services industry is complicated and we are stacking the deck against ourselves.

I see the growth of a vicious circle, employees who feel they are financially distressed are becoming less productive with a knock on effect to their employer, who is aware and wants to help, but both employer and employee find it a challenge to find, understand and apply advice to help.

So where do we go from here?

Like any issue in life, the first step to solving it is acknowledging that the stress exists. If you can, talk to your HR department and see what options are available. If your company offers it, get a session with an independent financial advisor to help get you the advice and tools to help better manage your situation.

Suzy Orman once said that “thoughtful financial planning can easily take a backseat to daily life”. Educate yourself and to ask the right questions.

The temptation is to hide and ignore this, in the hope that a recovery will come or there will be debt forgiveness. Perhaps that may happen, but the truth is that it is not going to happen anytime soon.

Liam Croke, the founder of MyMoney (www.my-money.ie), an online portal to help employees access financial information and tools to manage their finances. He is a qualified financial advisor (QFA) with over 24 years in the financial services sector. He advises organisations and people on personal finance issues of the day. He has written 5 books in the area of personal finance and has written articles for most newspapers in Ireland over the past 10 years.

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Liam Croke

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