If financial education does one thing right, it will be to help young people avoid learning the hard way about why it’s so important to be money savvy.
A third of millennials were expected to have put money into a cryptocurrency by the end of 2018, recent research claimed. The reason for ‘investing’ in bitcoin was that they felt “left behind” by investments like property and pensions.
My guess is that people over 35 would not buy lots of bitcoins. That’s not just because they may have property and pensions. It’s because they are likely to have learnt some hard lessons about money. We want young people to avoid learning the hard way. That is why our Young Financial Journalist of the Year 2018 competition is asking them to write about: 'Why should I care about being money savvy, and how can financial education help?
They should think about the cost of not knowing how to look after money, and about how to be properly informed. Young people borrowing for a degree will have major financial commitments before they even join the workforce. If they want to argue that putting everything into bitcoin will make those commitments go away, they’ll really need to explain why.
The judge for this year’s competition, Katie Morley, knows a thing or two about young people and money. She is the Consumer Affairs Editor at the Telegraph and was named Young Journalist of the Year 2013 by the Harold Wincott Foundation for business, economic and financial journalism.
Young people do care about money and that they want to be savvy about it. The London Institute of Banking & Finance’s Young Person’s Money Index – our annual report into financial capability of young people and the take up of financial education in schools across the UK – shows that 62% of them worry about money. Despite financial education being in the national curriculum since 2014, only around half get some form of financial education in school. Nonetheless, the majority of young people think they know enough about finance to handle it on their own. It turns out that, when they are asked more probing questions about what the financial future will hold for them, there are important things they don’t understand.
What a credit agreement means, what sort of burden paying interest can be, and how much people actually earn turn out to be fuzzy concepts. The young people tend to be very optimistic about the financial future. They expect to earn a lot more than the national average (around £17,000 to £20,000 a year more). They underestimate how much debt they are likely to have after university and they don’t realise how long it takes to save the deposit for a house. Around 36% of young people say they have lent or borrowed money informally, but only 2% say they have been in debt…I could go on.
Some, of course, do grasp that you need much more than wishful thinking to manage your money. Those who have had financial education are much more likely to save £10 a month or more. They also have a better understanding of what financial products and services are designed to do and how they should use them.
The Young Financial Journalist of the Year is aimed at helping young people engage with financial education, and to get excited and enthusiastic about how it can help them in their lives ahead.
We hope students studying our programmes will be one of the first generations to really understand what being money savvy is all about, so they can avoid some of the potential pitfalls some of us have had to learn about the hard way.
-Alison Pask is the Managing Director for Financial Capability and Community Outreach