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What do young people need to know about finance?
by Douglas Brown on Feb 05, 2013 at 14:03
We asked our panel of advisers how they would school the nation's young people in the basics of finance.
DirectorJane Smith Financial Planning
‘Having worked with the Personal Finance Education Group, I’ve had the slightly scary experience of taking part in financial education for children.
‘You have to teach the basics. For instance, if you have a job that pays £20,000, you don’t take home £20,000. Children need to be taught how to go about making a long-term and short-term budget, and the fundamentals of borrowing, such as the effects of fees and interest rates.’
DirectorWest Financial Management
‘Young people need to understand that parents do not have a money tree. I’ve spent time in Nepal, where children have a far more responsible attitude towards money. They don’t see money as theirs; it’s something their parents look after.
‘Children need to understand the financial implications of the career choices they make while at school. Moving towards working in a highly paid profession will have huge ramifications on their long-term financial future.
‘We need to teach the power of compound interest. In saving, it’s a means of building money and when applied to debt it can be damaging. Compound growth is taught in maths classes and, by linking it to finance, we would provide children with the tools to manage their financial futures better.’
Managing directorYvonne Goodwin Wealth Management
‘Young people need to understand the basics: that income needs to be greater than outgoings. That was previously taught at home through children watching their parents’ financial dealings, but credit cards have removed transactions from sight.
‘We need to explain what an annual percentage rate is, to get young people to understand the implications of interest rates on loans and savings so they can avoid the debt trap. They need to realise that payday loans may be quick to set up but have huge rates of interest.
‘It would be useful to explain what is covered by the Financial Services Compensation Scheme. It is probably one of the things I have to explain most.’
DirectorPrincipal Financial Solutions
‘Financial education should help young people to understand the short- and long-term implications of taking on debt and ensure they ask the right questions before taking on any liability. It should cover budget management, underlining the importance of keeping track of income and expenditure, and impress upon young people the benefits of starting good financial habits early in life.’
Financial services managerMilford & Dormor Solicitors
‘How do you get an 18-year-old interested in long-term pension planning? If you talk about long-term issues they can relate to, like planning to buy and insure a car, you can start to get them to consider the longer term issues of financial planning.
‘Financial education can’t be too hard to do. By joining the dots, we should be able to produce a course that educates children about, and gets them to engage with, their financial future.’