19 September 2019
Children and Money
Starting young, staying young.
By Lynda Goetz
This month two different surveys revealed that our young people have some way to go before they can claim proper adult status (many may not want to, of course). A survey by the price comparison website Moneysupermarket brought to our attention that large numbers of students have no idea how to manage their money and in some cases have already spent their maintenance loan within the first five weeks of term. This leaves them in situations where they are using credit cards and even taking out expensive payday loans (the interest on which can be astronomical).
Student penury is not, of course, a new thing. I remember students who lived on tins of cold baked beans, anchovies in tomato sauce and hard-boiled eggs (frequently left forgotten until the pan boiled dry and burnt) because they had very little money or had mismanaged what they had. Nevertheless, in those days there were several differences. Firstly, students were not regarded as adults. The age of majority was 21, not 18, and until that time they were regarded as the responsibility of parents or of the university ‘in loco parentis’. Then, the percentage that went to university was far, far less than it is now and the ways of paying for the privilege were very different. Nowadays, we have the anomalous situation where students are adults in the eyes of the law and entitled to vote etc.and yet appear to take longer to grow up than previous generations. (The other survey out this month by the National Youth Board on behalf of the National Citizen Service [NCS] came to the conclusion that British adults are not truly independent until 26 these days; an article in Metro magazine lists the questions asked in the survey for those interested).
Rather strangely, in the light of their ‘adult’ status, parental income is still used to assess entitlement to student loan support and the amount of that support*. Indeed, the current loan system contains an element of expected parental contribution, which not all parents realise to be the case. Some parents do not regard it as their responsibility to supplement the student loan, nor to keep an eye on their adult child’s ability to deal with their finances. A third of students admitted they had hidden debts from their parents.
The survey showed the difference between attitudes of those who started university 10 years ago and those who began their studies after 2015. Over a quarter of current students claim to have borrowed from a payday lender compared with just over 10 percent a decade ago. Is this simply due to higher living costs or rather greater lifestyle expectations? Whatever it is down to, it seems that unless they are to be mired in debt for a great deal of their lives, students and their parents need to start talking and taking action about money much, much earlier.
An article in The Telegraph in August ‘How to graduate from university debt-free’ made some suggestions which parents who wish to see their children go to university could start acting on from their very early years. It suggests that investing £346 monthly into a stocks and shares Junior Isa when a baby is born would cover the full cost (estimated to be £105,000 by then) by the time the child graduates at 21. Obviously, that level of investment from Day 1 may not be possible for many, but even £50 or £100 a month would alleviate the burden later. Grandparents could also help by gifting money.
Apart from parents actually putting aside money, what else should they do? Since 2014 personal finance has been on the national curriculum in secondary schools (maybe too late for those students in 2015 who saw fit to take out payday loans), but there have been increasing calls for it to be included at primary school level as well. Young Enterprise is a charitable organisation that has long argued for the introduction of personal finance education from a much younger age. In a Guardian article back in 2013, the role of the Personal Finance Education Group in attempting to shape the future national curriculum was highlighted, with the need for children to start understanding the concepts of money and finance from an early age. Six years later and this is clearly an issue which still needs addressing more widely.
A Telegraph article in June celebrated teachers who had won awards for their personal finance teaching at a ceremony held by Interactive Investor and Moneywise magazine. They shared their suggestions to parents as to how to talk to children about money. Most of these are the obvious things, which those of us brought up in financially ‘savvy’ households where ‘money didn’t grow on trees’ learnt as we grew up: the fact that electricity needs paying for; that sometimes you have to prioritise your needs and wants; that some things can be mended or re-purposed to save money (not to mention the environment); spending and saving pocket money; that money needs earning and so on. Clearly not all families have these conversations and, if those ads are anything to go by, perhaps money is indeed the last taboo now that we talk freely about almost everything else, .
The fact too that cash is used so much less these days makes it harder perhaps for children to absorb financial lessons in the simple ways they used to. If money is invisible and is accessed by ‘magic’ cards, then small wonder that so many students can reach ‘adulthood’ without any proper financial understanding. It is not just the job of the national curriculum to take up this baton, but very much a parental responsibility too. Just remember though that in spite of the law, your children do not reach adulthood until 26 – or possibly later**.
* Tragedies such as the suicide last autumn of Ceara Thacker also raise questions about the age of majority. Ceara had had mental health issues since she was 13 and yet Liverpool University did not inform her parents of her suicide attempt a few weeks before she was found hanged in her room. According to her parents she was ‘a really vulnerable 19-year-old who was living away from home for the first time, who wasn’t thinking straight, who wasn’t coping and who needed her family to support her.’ Presumably, since in the eyes of the law she is an adult, the Data Protection Act means they cannot disclose information without the student’s consent.
**Young Tom Ough wrote quite an amusing article on the subject last week
