Why the young must be taught financial skills
Part of the reason is a lack of understanding about how to manage money and this was confirmed by the Financial Services Authority (FSA) survey of more than 5,000 people - Financial Capability in the UK: establishing a baseline.
It found the under 40s - on whom some of the greatest financial demands are placed - are the least knowledgeable. The box below shows some of the alarming findings.
This problem of lack of understanding of financial matters is finally being tackled by a number of bodies, including the FSA, Scottish Qualifications Authority (SQA), Learning and Teaching Scotland, the Scottish Centre for Financial Education (SCFE), Communities Scotland and private companies, including Standard Life, Royal Bank of Scotland and Aegon UK.
At long last, there seems to have been a realisation that personal finance (PF) education is required from birth through to retirement and beyond.
For the first time, PF education may become a recognised school qualification thanks to work by the SQA, the national body in Scotland responsible for the development, accreditation, assessment and certification of qualifications other than degrees.It is currently looking at the development of a suite of standalone PF qualifications and has been in discussions with the Scottish Executive about the best way forward.
Robert Quinn, national qualifications manager for maths, languages and science at the SQA, said: "We're currently exploring the possibilities of PF qualifications.
"For example, we're talking to existing players down south, such as IFS Financial Services, and are considering launching a pilot programme in Scottish schools in April. But that's just one option we're considering."
It is likely that third and fourth year pupils will be targeted first with a foundation level certificate covering such areas as methods of payment and various forms of debt to equip them with skills to avoid getting into severe financial difficulties.
On the back of its survey, the FSA has launched its National Strategy for Financial Capability which will invest 17 million in a range of projects next year, up from 9m this year.
Shaun Mundy, head of financial capability at the FSA, said: "We're investing a significant sum of money and will be working with a number of parties to deliver our strategy."
It has launched a website at www.moneymadeclear.fsa.gov.uk backed with an advertising campaign to help people cut through financial jargon.
Realising that having a family can cause financial stress, it has developed a parent's guide to money and is piloting it with employers, including Mothercare, whose staff are having children. If successful, this will be rolled out to health services to reach all new mothers.
The FSA is also funding two additional posts at the SCFE, part of Learning and Teaching Scotland, which is helping to promote financial education in schools.
A new programme being launched by the SCFE in spring with the Scottish Book Trust, sponsored by Standard Life, involves all primary schools being given new children's books by Scottish writers and illustrated by Scottish artists which have themes related to personal finance.
For example, one story tackles the issue of a family being in debt from a child's point of view and another features a charity fundraising scenario.
Jim Lally, director of SCFE, said: "We want financial capability to be part of every child's education and this is just one example of how we're equipping teachers with resources do this. Schools have been very supportive and of the thousands of teachers I've spoken to, the overwhelming majority have been in favour."
To help young adults, the FSA has unveiled its Money Doctors project to train welfare staff and students in universities to offer advice on managing a budget.
Mundy explained: "Universities are keen to get involved as money worry is one of the biggest reasons for students dropping out of university and they now have to publish figures on how many don't complete their courses."
To assist young people and adults with numeracy and literacy, the Big Plus awareness-raising campaign was launched in January 2004, funded by Learning Connections and joint branded with learndirect Scotland.
It is tackling the issue that one in five adults in Scotland have problems with reading, writing or using numbers.
While few people are completely illiterate, there are approximately 800,000 adults in Scotland with problems ranging from not being able to divide to those who aren't able to write their own name. Of these, 500,000 assess their skills as poor or moderate and the remaining 300,000 are either not aware of their problem or don't want to recognise it.
Lillias Noble, head of Learning Connections at Communities Scotland, said: "One of the Big Plus's most important roles is to encourage people who may be struggling with reading, writing or numbers to contact local learning providers.
"The latest Big Plus campaign targets young people and highlights the impact of improved skills on employability and health and well being. It also focuses on numeracy and its impact on everyday life."
Finally, Standard Life is helping make pensions understandable with its retirement planner available online at www.standardlife.co.uk.
All you have to do is input basic information, such as your age and contributions, and within a few minutes it will graphically illustrate whether you're saving enough to hit your target retirement income. It will also tell you how much more you need to put aside if you aren't saving enough.
Although debt is not going to vanish overnight, it's encouraging that funding and other resources are being pumped into helping Scots take control of their finances.
A big plus for one learner
CATHIE McKerracher struggled with numeracy all her life and lacked confidence when having to deal with numbers. She was able to do simple calculations and could manage her weekly budget but her husband manages the household budget and payment of bills. Cathie wanted to learn to work out problems, to calculate percentages and simple fractions and was unsure about using metric measurement. She couldn't convert imperial measurement to metric. Cathie's son was also having difficulty with numeracy at school and she wanted to help him. This spurred her into coming to a numeracy class in Tranent.
She says attending the class has helped her so much. Her son, who is 16 and still needs help to improve his numeracy skills, is joining the class in August. The Big Plus for her was being able to help her son with his homework.
AROUND 70 per cent of people have no personal provision to cover an unexpected drop in income, according to the FSA survey on financial capability.
• Of the 1.5 million people falling behind with bills or credit commitments, one third say they have real financial problems.
• Another three million people admit to struggling to keep up financial commitments.
• Around 7 per cent of people have no idea of their current account balance to within 500.