Young people count

20 March 2008

It’s good to be optimistic, but hope is no substitute for understanding, especially when it comes to money. So it’s great to see teachers and businesses working together to prepare children for the financial realities of life, from banking and budgeting to debt and money management.

MoneySense for Schools
The Royal Bank of Scotland’s MoneySense for Schools programme is an excellent example of this. Teaching children how to handle their money, the programme is also helping schools understand children’s attitudes to (and comprehension of) financial matters.

Published in March 2008, the MoneySense Research Panel Report* is “an important addition to our understanding of young people’s attitude to managing their money”, says Chris Pond, Director of Financial Capability at the Financial Services Authority (FSA).

Ready for the real world?
In many ways, the report makes encouraging reading, revealing that children already understand many of the basics of money.

They’ve already picked up all kinds of good habits. For example:

• 82% (and 92% of 17-year-olds) thought it was important to save money
• 88% were saving for something at the time they were surveyed
• 79% claimed they kept track of their money
• 63% claimed they didn’t spend money which they needed for something else.

However, there were clearly some worrying gaps in their knowledge. For example:

• 50% couldn’t identify the cheapest APR and loan term
• Only 36% of the 18 year-olds questioned would consider the interest rate when borrowing money.

There were also some signs that the youngsters needed to learn about the importance of budgeting:

• Only 5% wrote things down to help them budget – 46% just remembered what they’d spent
• When asked if they agreed with the statement ‘If I run out of money, I just get more from someone at home’, 63% agreed / strongly agreed, while just 34% disagreed / strongly disagreed.

Confidence or inexperience?
Asked what they expected in their own future, most children seemed aware of the financial pitfalls ahead, but confident that they’d be able to avoid them.

Without real-life experience, it’s easy to believe everything will work out as you’d planned. Perhaps that’s why the survey returned such mixed findings. On the one hand, it looks like many of today’s youngsters have a pretty good grasp of current events. On the other hand, ‘youthful enthusiasm’ can make it hard for them to understand what those trends mean for them as individuals.

For example: while 61% were worried about getting into debt in the future, only 26% thought they actually would get into debt. And although 68% of the youngsters who expected to go into higher education realised they’d get into debt while they were there, almost 25% thought they’d start paying it off before they’d finished their education. In reality, debt is often much harder to manage. Personal debt in the UK is growing all the time – and so is the number of people seeking professional debt advice or debt management solutions.

Only time will tell
It’s encouraging to see that tomorrow’s adults are able to understand the dangers of money without losing heart. But how much of that confidence is based on unrealistic expectations?

Although it’s good to dream of home ownership, for instance, it’s probably unrealistic to expect it early in life. Of the 59% who expect to own their own home before the age of 25, most will probably be disappointed. But salaries are likely to be an even bigger disappointment: the average respondent expected to be earning £70,000 a year by the age of 35! Maybe a a ‘reality check’ on salaries would lead to lower expectations in terms of home ownership, debt management, higher education...

*The 2007 MoneySense panel research findings are based on a representative sample of 8,454 young people, aged 11-19, in schools and colleges across England, Scotland and Wales.

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