Financial Literacy for the youth – how far are we?

When were you first taught about money? In most cases it comes with the embarrassment of having a debit card declined, internet services suspended or having to pay an overdraft bill.

The times we live in are economically challenging to say the least, the politics and behaviours regarding employment, pensions and mortgages have changed drastically over the last 50 years, and people are being required to make decisions involving money at a younger and younger age. It would be shocking to expect someone who is learning how to drive to compete in the F1, yet we are thrown into a world where we have to make difficult decisions about money with very little, or no training at all. Whether it is taking out a student loan or saving to buy a house, the financial decisions we have to make are sometimes difficult even for economics graduates.

Combine this convoluted economic scenario to a world that glorifies celebrities and consumerist culture, where wealth is flaunted and buying is incentivised, and we have an even more complex picture. The record-high amounts of personal debt, £1.58 trillion in the UK $1 trillion in the U.S (Reference) , just go to prove how ill equipped people are in dealing with money, and how the issue goes beyond the personal to something that affects us all. Research shows that students worldwide grow up in an environment where they have very limited understanding of what goes around them financially.

School curriculums often equate having mathematical skills to having money skills. Although being good with numbers certainly helps, dealing with money is much more related to behaviour (usually learnt at a very young age) than any particular set of academic competencies. In the United Kingdom, there have been efforts in recent years to include financial literacy as a compulsory subject in primary school, but implementation has been inconsistent and limited. A great part of the trouble comes from teachers not knowing how to, or not having the confidence to approach the subject- either because they haven’t themselves been trained about it or simply because talking about money is still regarded as a personal matter.

A number of non-for-profit organisations, many times backed by big businesses and banks, have been trying to fix the issue at hand. Young Money/Young Enterprise in the UK for instance supports educators in developing the financial capability of the young people they teach from primary to university level. Stride ‘Putting Young Minds to Work’ is another initiative in the country which offers practical courses about financing and entrepreneurship. Stride goes directly to students and uses hands-on exercises, such as giving teams £40 to build a micro business, which they then have to repay through selling their products, all the while making a profit. In the United States, Cents Ability, was founded by Alexa du Pont Bell, an investment banker with a degree from Harvard who nonetheless realised that at 22 she was struggling to keep up with her personal finances. The nonprofit teaches financial literacy to thousands of high school students across New York City, offering the basics on budgeting, credit scores, saving and investing.

There is much debate however whether it is solely on schools to teach children about money – or whether the responsibility should also be shared with parents. A number of new payment companies and spin-off banking applications such as Gimi and goHenry, have been developed to provide aid to parents in teaching their children about finance. On Gimi, for instance, parents set weekly allowances as pocket money for their children. In turn, the children can set themselves savings goals for “dream” buys, the app also gradually introduces the idea of overdraft and interest rates.

Yet, knowing how to deal with money doesn’t just involve being acquainted with facts and terminology, but also addressing our emotional relation to it. Recent studies show that emotional intelligence (EQ) is more critical to investing money than IQ for instance, which just goes to show that emotions are a key driver when it comes to our spending and saving habits. It is also easy to see the impact that money, or the lack of it, can have in our mental health – depression, stress and anxiety affects most of us when we worry about our finances. Money, like sex, is still a taboo topic in most societies which makes us avoid, or feel awkward, in talking about financial difficulties to even our closest friends.

While the topic of financial literacy is increasingly relevant, there is still a long way to go in making sure today’s youth is equipped with the necessary skills, knowledge and attitudes when it comes to money. It is also important to remember, that something as simple as talking about it, be it in school, with your parents or just friends, can go a long way in clearing up misunderstandings and confusions we all have about money.