Why should I care about being money savvy, and how can financial education help?
(Posted on 03/05/18)
In Today’s climate being money savvy is more important than ever; for this reason Financial Education is firmly on the agenda for many UK schools, hoping that some of the messages about how to stay debt free and manage finances will have an impact on helping to reduce personal debt of UK citizens. An important part of financial education is budgeting and planning, helping to minimize debt and its consequences. Those who are well educated are well equipped to manage their finances effectively, to help them avoid the debt spiral which becomes uncontrollable. Financial education helps to educate young people about the importance of incorporating all of these debt repayments into a planned budget.
It is clear that UK debt is spiraling out of control, debt is up by 7% over the last five years with the average UK person having personal debts of £8,000, resulting in £1,630.1bn in debt for the UK economy as a whole. Debt has got so bad for many people that 6 million of us fear that they will never be debt free for their entire lives. Bewilderment, desperation and entrapment, are just some of the adjectives I would use to describe the feelings of someone in such circumstance.
Why does the UK have a problem with debt?
A worrying survey conducted by Money Advice Service at the start of 2018 suggested that more than 30% of people aged between 16 and 25 said they have not put money into a savings account in the last twelve months. This shows a potential lack of knowledge about how to manage finances and the importance of saving for long and short term goals. In the same survey less than five percent of young adults valued saving into a pension as being in their top three priorities in life.
Both younger and older generations are also taking out loans such as pay day loans which have astronomical interest rates as high as 2000%, that are totally unaffordable. As a result, the debt rapidly grows to unmanageable amounts, people then lose their cars and even their homes.
Poor spending habits also cause debt because people spend much more than they earn, resulting them having to go into their overdrafts which have high penalty fees of as much as £1 a day.
YouGov studies have shown that 70% of 18-24 year olds are in debt. Some debts such as student loans are unavoidable for those wanting access to higher education but cannot afford the cost.
What are the problems of being in debt?
The main problems of debt suicide and depression. People who are in debt cannot see a way out of their crisis and because they are in debt they can’t pay back the become depressed and sometime commute suicide. People being in debt caused 70% of suicide in the UK in 2016.
What advice can you give them?
I recommend visiting a debt managing charity to help you get out of debt and keep you out of it so you do not go back in debt. However, I would tell them to spend less money on food and holidays and new clothes went you do not need them especially not from an expensive shop when you could buy something similar from a cheaper shop.
How can financial education help?
Financial education can help raise awareness of why it is important to manage finances and how to manage finances because without this problem being addressed. Let’s hope some of the key messages stick with students so that they can make safe and secure financial choices for the future.
Rebecca Jenkins Year 10