Lots of charities offer free money advice. Government supported charities and the CAB are all agencies that currently offer these services for free within the UK, but how useful are these services really? Do they tell you stuff you already know? Or are they really helpful? This blog focuses on recent research highlighting the advantages of free money advice and explains how getting free cash counselling can put you on the financial straight and narrow for good!
Free debt advice as part of financial regulation crackdown
Free and independent financial advice has been included as something lenders for example payday lenders like Wonga must alert borrowers to as part of new government regulations to make the lending sector more fair to the financial consumer. Financial consumers now have the right to be advised to seek free, impartial debt advice before they consider other financial solutions like loans, or payday loans.
Free financial advice - does it really work?
However, there has been very little research conducted on the correlation between receiving free debt advice and improved financial circumstances, so many are rightly dubious as to the quality of the advice you are likely to receive from a debt counsellor and the chances the advice will actually help. Is the advice a little like the advice we get from government on eating five fruits or veg a day - i.e. we all know what to do but we don't always do it, or is the advice gritty and realistic, giving real solutions to real-life problems?
Recent research carried out by the Money Advice Service - the free, independent advice service set up by the UK government to give people advice on financial affairs suggests that people who receive debt counselling are much more likely to avoid financial strife, down the line.
In 2014, the Money Advice Service researched the short and long term impacts of debt counselling. 88% of people surveyed by the Money Advice Service in 2014 stated they went on to take some positive action about their debt as a result of the advice they received. 76% of those surveyed indicated they had cleared or reduced their debts within six months of the advice, as a result of the financial advice they received, whereas 6% reported they had cleared all of their debts within six months as a result of the advice they received.
Although the project was relatively small in that it included just over 1000 people, and the Money Advice Service clearly has an interest in positively portraying the efficacy of a service they offer (free financial advice), the results do suggest there is a link between getting financial advice and sorting out debt problems. Moreover the Money Advice Service is a independent body and this lends credibility to the research results. Overall therefore it does appear that receipt of free money advice does help people iron out any financial problems they may have or at least show them how to get out of debt.
Financial advice: hidden benefits
The 2014 research project conducted by the Money Advice Service also shed light on some hidden benefits of receiving financial advice. More than 67% of the people surveyed by the Money Advice Service in 2014 stated that they were able to sleep better as a result of the financial advice they received. 80% of the people surveyed stated that they felt less stressed about their financial situation whereas more than 70% of those surveyed stated that they were less stressed out about their financial situation.
Financial advice: more research needed
So, there you have it, the doubters of the value of free money advice have been proved wrong. Free money advice does work. However, it is clear that there is room for improvement in the efficacy of the advice given. Whereas a majority of people stated they found the advice helpful, we need to know more about why people found it unhelpful, or were unable to sort their finances out as a result of it. By tapping into these people and their experiences, we can learn how to effectively help people in financial strife.
Why not get involved in the debate?: post a comment and tell us what you think!