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Voices: We can break the cycle of bad debt by giving children a financial education

The past few years have seen unprecedented amounts of financial pressure piled on young people. The pandemic and lockdown meant lost job opportunities, lost part-time incomes and more competition for entry-level jobs than ever before. This has been coupled with a never seen before marketing drive on social media platforms to encourage young people to spend more and invest in risky financial products.

The boom in online retail through the pandemic also saw a boom in buy now, pay later schemes available with almost all major retailers. Young people have found themselves heavily marketed to on social media by platforms that offer incredibly appealing interest-free credit spread over several months. While interest-free deals look tempting, it encourages young people to normalise debt for everyday purchases.

With cryptocurrencies, loot boxes, and scam advertising all prevalent across social channels, this adds up to multiple risk factors for young people. We discussed this at our recent Minding Your Money event with Money Saving Expert, Martin Lewis, who put it simply: “We live in an online Wild West world where the internet that we have, and social media especially, is hideously unregulated.”

And as only one in three primary schoolchildren and less than half of secondary schoolchildren receive any form of financial education, it’s no surprise that 67 per cent of young people do not feel confident planning for their financial future, with the average young adult spending six hours a day feeling anxious, their main concern? Money.

Whilst the anxiety is evident, combatting this mindset is one of many on the list of educational priorities.

And as Lewis advocates, proper financial education is essential for bolstering confidence in being able to navigate life’s hurdles. “The most important thing we can teach young people is to ask questions, and whatever consumer transaction you’re making, that decision will always be better with a little bit of research behind it,” he said. “When you talk to children about money, they will engage with it. Young people are professionals at learning, and if you want to break the cycle of bad debt and bad consuming, you start it when they are open to learning”.

By grasping this opportunity, we can not only increase the financial capability of young people, but also make real change to social mobility.

A new report by think tank The Social Market Foundation found that young people from lower-income backgrounds were less optimistic and feel less equipped to compete compared to those from higher-income backgrounds.

We need to encourage more young people to take advantage of the available opportunities to develop their financial capability and an enterprising mindset. And for those with fewer opportunities, this becomes even more important. By not being able to make informed financial decisions on purchases, savings, and when it’s OK to take on debt, young people can miss out on the experiences that can positively impact their futures and change their lives.

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One of the biggest routes out of poverty is education. So why not prioritise education surrounding personal finance that can teach young people about how they might be able to get themselves out of poverty, how they might be able to earn more, and how they can save for future goals?

Through changing social mobility, through enabling more positive development with financial education, as Lewis suggests, the benefits that we will see are unparalleled, not just to the individual but to society: “The triviality of the cost of financial education in proportion to the gain both for the economy, the individual ... of having people being more financially savvy, more financially literate and better able to take care of themselves, it would be the best return on capital that the government has ever had.”

Financial education has never been more vital than it is today. There needs to be greater urgency from the government to support educators to prioritise the need for financial education for all. If we remain blind to the benefit that this will offer, then we are not only inhibiting the potential of our younger generations but are damaging socioeconomic health on a societal scale.

Sharon Davies is CEO of Young Enterprise and Young Money