This is particularly important as recent research has found that a significant percentage of English and Northern Irish adults are lacking financial skills.
Financial skills deficit
The scientific study, which looked at financial knowledge and skills across the world, found that a third of adults in England could not work out how much change they should receive (source: A. Bhutoria, J. Jerrim, A. Vignoles, 2018. The financial skills of adults across the world: New estimates from PIAAC). In other measures of financial knowledge, such as calculating the cost of goods according to a certain unit, English and Northern Irish adults also ended up scoring below average.
This is worrying news, and could explain why a separate study from financial education charity MyBnk sees 54% of parents call for schools to spend more time teaching kids about personal finance. Fifty-six percent would even choose to cut time from the national curriculum to teach children about budgeting and how to avoid debt.
With the Financial Conduct Authority warning that young people are building up an alarming amount of debt, this is certainly a group that could use a better understanding of finance. To help young people get to grips with their own money management a bit better, money manager Plum has compiled a list of tips:
- Save yourself from yourself. It's easy to get tempted by advertisements or your friends to spend more than you intend. To make sure you can still pay your bills, Plum suggests setting aside whatever you need to get through the week/month, in a separate easy access account for instance, so you can't get tempted into spending too much.
- Avoid your overdraft. It's easy to get tempted into using your current account's overdraft, with banks often giving students special deals that reduce the associated fees. However, it's not a healthy habit to get into. If you absolutely can't resist the urge to dip into the red, consider switching to a special student account that offers free overdrafts, or even a basic account that doesn't have an overdraft facility.
- Track your spending. If you keep an eye on how much you're spending and what on, even just by logging into your online bank account once a week, you should be able to see what you're spending too much money on. This includes things such as subscriptions that you're not getting anything out of, which you may be better off cancelling.
- Use credit sparingly. Aside from your overdraft, you may be tempted to get a credit card to pay for things. Always remember that you'll need to keep up with minimum repayments and pay back the whole debt eventually, so if you really must have one, make sure the card comes with low or 0% interest and no management fees. Our Best Buys may be a good place to start.