Financial education: Helping young people navigate the economic arena 

Sharon Davies, CEO, Young Enterprise, looks into the financial pressures facing university students, the hurdles they must overcome and what can be done to help combat these issues

As freshers complete their first half term of studies and adjust to a new life of independence away from home, they might be forgiven for forgetting that their student loan needs to last them for the rest of the year.

Whether it’s paying rent for the first time, managing budgets or trying to understand how much things should cost, one of the worst hangovers many university students are dealing with is the financial kind. Rising student debt and soaring property prices were already a huge concern for young people. Adding in the pandemic and increased living costs, it’s little wonder that the financial challenges they face are larger than ever.

Whilst not uncommon for students to feel out of their depth financially, the end of lockdown has also proved expensive for many young people unused to socialising over the past year and a half. It’s, therefore, no surprise that 67% of young people do not feel confident planning for their financial future, with the average young adult spending six hours a day feeling anxious, with their main concern being money.

Pandemic induced pressures have presented themselves in a variety of forms, including the dangers tied to the rise of digital financial platforms. Alongside being heavily marketed to on social media with damaging cryptocurrency offers, gambling platforms, and loot boxes on online gaming, young people are also often the victims of financial misinformation and growing research proposes they are now the most at risk from fraud.

Student debt

Money lending platforms, such as Klarna have established themselves online in most major retailers at a rapid pace. Last year Klarna became one of the biggest fintech startups in Europe with a valuation of $5.5 billion.  As the pandemic progressed, so did the need to shop online, a trend that seems to be staying firmly in place with lending up by over 20% on platforms like Klarna. Whilst shoppers have embraced the platform with open arms, many finance experts have criticised it for making debt more accessible to young people. Though the government has indicated that there will be tighter regulations on ‘Buy Now Pay Later Platforms’ (BNPL), we may not see these come into effect until 2023.

As new ways of paying for things are multiplying, it has made it considerably easier for students to fall into debt without even realising it as they do not fully understand what they’re signing up for. Think about it in terms of having a credit card, something many Gen  Z young people see as either risky or having negative connotations, due to family or friends having bad experiences, or associated with making major life choices such as buying a house or having a baby

On the flip side, platforms like Klarna that offer a very similar service, seem to be incredibly convincing to young people and appear a lot safer in comparison. The process is effortless, with modern branding and strong ties to trusted retailers, the platform doesn’t portray debt, financial uncertainty or bankruptcy in a negative light.

The enticing motto of buy what you want now, pay for it later has left many young adults spiralling into debt,  sucked into a cycle of buying things they can’t afford and then worrying about the consequences belatedly.

Financial advice

The bigger picture being painted suggests many young people may be getting the wrong financial advice or perhaps no advice at all. A Citizen’s advice survey suggests that not only are 50% of young people unaware they are using Buy Now Pay Later schemes but one in three regrets doing so. It appears that when it comes to financial management, young people are facing an uphill battle, often resulting in low financial resilience, purporting that not only are they ill-equipped to deal with money manipulation but are also developing significant anxiety around money that can easily impact their overall wellbeing.

Whilst it is important that such platforms take responsibility in ensuring that young adults are not so easily misled, this still doesn’t tackle the root of the problem at hand. The role of values, attitudes, beliefs and ideas about money manifest in a wide range of behaviours. This includes our confidence to ask questions about money, our approach to problem-solving about finances, as well as our financial behaviours when it comes to goal setting.

A study from the Money Advice Service confirms that attitudes and habits around money, that will stick with us for life, are formed by the age of 7. However, only one in three primary school children and 48% of those in secondary school currently receive any form of financial education, despite it being on the national curriculum. How can young adults present the confluence of financial, credit, and debt management knowledge that is necessary to make financially responsible decisions if they are denied the basic education of how these systems work?

At Young Enterprise we believe that young people’s potential is unlimited, but in so many instances, their potential is being held back by a lack of understanding when it comes to money management. If children of primary age are equipped with the knowledge to understand the basics of finances this can then develop accordingly as education continues.

Young Enterprise is running multiple financial education programmes to encourage just this. A key example is the introduction of My Money Week, a national activity week for primary and secondary schools that provides children with the opportunity to gain the skills, knowledge and confidence in money matters. Similarly, the Young Money Challenge encourages young people to consider the connection between money management and community impact. Both of these schemes offer the kind of support that we must be provided to young people if they are to thrive.

It is essential that as young people enter into a new world of education, work, technology and new pressures, that they have the tools and confidence to navigate the ever-changing economic arena that the future is presenting. It is crucial that we are committed to ensuring that financial education remains at the forefront of the education agenda, guaranteeing young people the support they deserve when it comes to money management, at a time they need it, regardless of their starting point.