Having bills to pay is one of the realities of adult life. Whether it’s paying your rent or mortgage, or keeping on top of your monthly phone bill or car insurance, we all have outgoings that need to be maintained. However, it’s easy to forget that at one point this experience was a very new one, especially when transitioning into adulthood. Maybe you have been paying bills for many years, to the point that it has become second nature, or you may have only just started on your financial journey. What’s clear is, not everyone will be as knowledgeable about money as others. It’s reported just 8% of young people say they learned the most about money in school, highlighting that the vast majority rely on the potentially unstructured advice of their family and friends, or are self-taught.This is the same across the water in the United States, with just 17 states previously requiring high school students to take a course in personal finance,although this has since grown to 21.This raises questions about financial literacy for young adults; are they prepared for arguably one of the most important factors in adult life? Here, we’re taking a closer look at the importance of understanding finances from an early age.
The Impact of Poor Financial Literacy in the UK
There are some parallels with poor financial education and growing consumer debt levels. Figures released by the Office of National Statistics show the UK has £22 billion in credit card debts and £3 billion in overdraft debts, with the average UK household debt rising by 9% to £9,400.Compare this to the figure that 9 out of 10 surveyed consumers feel undereducated with financial literacy in the UK, it’s easy to see there is a need for better resources for customers. Financial literacy research including a study by researchers at UCL has found nearly a third of adults couldn’t work out the correct change needed when paying for shopping.This highlights just one example of the impact that poor financial literacy can have on adults and their everyday lives.
Poor financial literacy could also impact the financial decisions individuals make when it comes to borrowing and savings. For example, there may be a lack of understanding around the implications of high cost short term loans and interest rates, or the right savings account which can be of most benefit in the future. With some financial products available such as payday loans which should only be used in the event of a financial emergency, it is important for borrowers to fully understand the terms of their loan. Without basic financial literacy, there may be a higher risk of poor financial decisions being made.
The Role Schools Have In Teaching Financial Literacy
Financial education in schools can help pupils to make informed decisions about money and their finances while they are young, and also in the future. In England, financial education is included within the national curriculum, but only in secondary schools and part of other subjects such as citizenship and maths. Despite this, just 1 in 4 children and young people say that they have had some financial education. In addition, 35% of schools in the UK are academies and free schools, which means that they do not abide by the national curriculum. While these types of schools may draw from this educational timetable, this could highlight a large proportion of individuals who are missing out on this important financial education.
Schools are, however, looking to improve their stance on financial education, with the Young Persons’ Money Index 2019 showing that 64% of students say that they have access to financial education. This has increased from 29% in 2015. In order to be financially capable in the future, young people require an understanding of the practicalities of managing money both day to day and in the long-term.
The importance of increasing financial literacy for young adults is something many organisations are looking to promote and improve. The National Financial Educators Council are one such organisation, with a focus on tackling the challenges being faced with teaching kids’ financial literacy. Tasks such as moving out of the family home to purchasing a first car are all important topics that will help raise awareness of the potential financial issues these decisions can have. Some educators have even called for compulsory financial education to assist with fighting poverty. There are many ways that the subject can be discussed, but it’s clear that education is one of the most effective ways to help young adults have a happier financial future.
The Role Of FinTech In Financial Literacy
As well as formal education, there are many other avenues to be explored on the path to improving financial literacy for young adults. Many fintech companies have identified that a key priority for their service offerings is to assist with teaching financial literacy and helping individuals strive for better spending habits. Smartphone apps designed to help with savings, staying on top of your credit score, and assisting with budgeting are just some examples of how fintech has a role to play in financial literacy.
Further to this, there are some startup companies which are focused on incentivising children and young adults to become smarter financially and more independent. For example, Greenlight offer a tool which allows children to have access to their own personal debit card, with flexible parental controls. This helps parents to teach children about money management, savings and also to motivate and incentivise children to do chores.Despite some fintech companies taking the reins with financial education, 47% of customers believe it’s a bank’s duty to help them to make better money decisions. The concern with fintech playing a stronger role in modern society is that the abundance of technology and information makes finding impartial financial information more difficult.
Consumer Protection In The Financial Industry
As a result of this lack of financial literacy, consumer protection in the financial industry is more important. A key objective of the Financial Conduct Authority (FCA) is to ensure that all lenders offer an appropriate degree of protection for all consumers. By encouraging and facilitating best practice, alongside ensuring consumers remain well-informed at all times, financial institutions across the market can help to better protect consumers and assist with better decision making.
At Wizzcash, we pride ourselves on being a responsible lender. With a series of credit and affordability checks in place to ensure that our customers are only able to lend from us if they can afford to pay back, allows us to continue to abide by best practice and protect consumers. Further to this, we offer a wealth of information across our site to ensure our customers remain well-informed at all times. To find out more about our lending products, please browse the website or contact us for more information.