August 21st 2023 – Money Marketing – View the article here.
Many surveys paint a depressing picture of financial literacy in the UK among people outside the bubble of the financial services industry. The spotlight tends to be on adults who lack basic financial skills and do not feel confident about financial matters.
These were once children who were not taught about money matters when they were growing up, either by parents or teachers and studies often show that little changes throughout the generations. But this is only one side of the story – could young people be more financially savvy than studies suggest?
Talking about money
Those who grow up knowing little about money eventually become parents – and in some cases, teachers – who have not necessarily acquired the skills to teach the next generation about personal finances.
Back in June, we heard from the Money and Pensions Service that just 47% of children aged 7-17 had ‘received a meaningful financial education at home or at school. Taking into account children in the five- and six-year-old age bracket as well, MaPs estimates that 5.4m children do not have the money skills they will need as adults. However, other studies indicate that perhaps the situation around financial literacy for today’s youngsters is not as bleak as it appears.
Last year, Royal London found that 76% of 18-24-year-olds talked to their parents about money when they were growing up, compared to 43% of people aged 65 or over, 52% of 55-64-year-olds and 58% of 45-54-year-olds. Being more open about money is something that is improving across the generations- but unless those conversations encourage good financial habits such as saving and budgeting, they will not help financial awareness into adulthood.
However, recent research from Now Pensions with the charity Debate Mate suggests that many young people do understand the importance of financial education and good financial habits such saving for retirement.
It found 86% young people aged 11 to 27 found supported the government’s proposal to reduce the qualifying age for auto-enrolment from 22 to 18. Even more young people – 89% – think pensions should be a bigger part of the national curriculum.
Michael Barton, a personal finance expert at financial education website Wallet Savvy, says during his financial services career, he has seen ‘unexpected resilience and wisdom’ among young people.
“It’s easy to underestimate them, but they’re far more financially aware than we often give them credit for,” he says. “Thanks to the digital age, information about money management, investments, and even cryptocurrencies, is just a click away.” He believes the empowerment derived from this ‘is nothing short of revolutionary’.
Barton remembers one client who had already started saving for his retirement at 18. “His understanding of compound interest wasn’t just theoretical; he was living it, embracing the essence of financial foresight,” he says. “It was a commitment to his future – a wise recognition of what lay ahead.”
Stories like this are not just heartwarming anecdotes to Barton – they indicate a cultural shift in how young people view and handle money. This is something that Go Henry found in research it conducted this summer. It found UK kids are saving more than ever, with a 145% uplift year-on-year. Overall, savings reached an average of £61.03 per child, which is a monthly average of £5.09 and a weekly average of £1.17.
To get an idea of exactly how youngsters are managing their money, Go Henry spoke to some children who are saving using its app. Theo, an eight-year-old from Doncaster, is already saving for a house and has managed to put away £75 so far.
“I watch Homes Under the Hammer in the school holidays which has made me want to buy a council house, as it’s a little cheaper, and I could rent it out for good money,” he says. Theo gets £2 pocket money a week, plus 50p for chores like cleaning his room. “It’s important to start saving now as when I’m older, I will have to look after myself,” Theo told Go Henry.
One point that commentators make is that to be effective, financial education – whether at home or school – needs to be pitched at the right level and relatable, so that important lessons are not lost in translation.
“When young minds can relate financial education to their daily lives, that’s when the magic happens. It becomes a living lesson, one that influences choices and shapes destinies,” says Alastair Hazell, a financial coach and founder of financial education website The Calculator Site. “The challenge is to translate the often dry and complex financial jargon into something tangible and engaging. But when we get it right, financial education becomes a life skill.”
Paul Rossini, chief executive and cofounder of digital legacy platform AssetPass believes young people are becoming much more financially savvy than previous generations. “The pandemic and the current cost-of-living crisis have unfortunately shown young people the importance of planning if the worst should happen,” he says. “Social media platforms, like TikTok, have also shown them the importance of investing and having more than one stream of income for financial security.”
This is a point taken up by Hazell. He points out that digital platforms, online forums and financial apps can help fill the gap in formal financial education. He has also seen how open conversations about money a home means young people are less likely to see money as a taboo topic – and exposure in the real world can complement the theory they might pick up online or at school.
For Hazell, the problem is that not all financial conversations children are having at home are equal. “While some kids might be receiving nuanced insights into saving, investing, and even retirement planning, others might be hearing outdated or misleading advice,” he says.
The same could be said of online resources – with a lot of misinformation online, there are dangers with young people turning to social media platforms for financial education and guidance. This is why some commentators believe schools and educational institutions need to play a significant role in providing young people with a financial education – to provide a reliable source of financial information.
“By teaching students about the importance of budgeting, saving, and understanding the implications of taxes, educational institutions can empower young individuals to make informed financial decisions and set themselves up for a secure and prosperous future,” says Sam Dallow, co-founder of tax consultancy Counting King. “Partnerships between schools and financial institutions can also be beneficial in providing resources and expertise to enhance financial education programs.”