Sharon Davies, CEO of Young Enterprise, says the right financial education could inspire a generation of talented future employees
Financial literacy can transform not only the lives of young people in the UK, but the economy at large.
As we begin to overcome the economic and social fallout from widespread lockdown and uncertainty, unlocking the skills of the next generation of workers and entrepreneurs will play a critical role in ensuring the country is ready to thrive and flourish post-pandemic work towards a better future.
Almost half of adults fail the financial literacy test
Currently the level of financial literacy in the UK is not where it should be. A recent survey of 2,000 UK adults showed that almost half of adults fail a test on basic financial skills in key areas such as saving, investing and retirement.
With young people growing up in a complex and ever-changing financial landscape, with pressures and uncertainty surrounding products, investment methods, and ways to make money, financial literacy has never been more important to educators, policymakers, parents, and young people awakening to the need to make the next generation feel comfortable talking about money.
The scale of the problems should not be underestimated as the Money and Pensions Service shows that 55% of people do not feel comfortable talking about their financial situation, while 67% of young people are not confident about planning their financial future .
Financial literacy has the potential to help young people succeed
It’s time to restate the notion that financial literacy is just a sum and instead has the potential to help young people thrive and open up opportunities for them.
This begins with the education of children in elementary school as they shape their mindset with money and shape their financial performance into young adulthood and beyond.
Essentially, although part of the secondary school curriculum, financial education has not taught young people the intricacies of how to unleash their financial skills and opportunities, and it is vital that this is addressed head-on.
Young people should be able to understand how to make the most of their money while balancing the world of financial risks and rewards.
They need to learn the different ways of managing a household, saving, and how to analyze and evaluate the success of their savings while, on the other hand, gaining an in-depth understanding of best practice in borrowing and leverage personal debt.
Crucial to helping young people with 21st century financial challenges
Fundamentally, we need to focus on making sure young people not only feel in control of their money, but can use it to the best of their ability, starting with making sure young people feel prepared for and in the workplace able to make money and take care of their money.
While it’s incredibly important to focus on young people’s skills and instill a sense of an entrepreneurial mindset, it’s also important to help them navigate the potential pitfalls of the 21st century. The world is becoming increasingly cashless, investment opportunities such as stocks and cryptocurrencies are available to young people at the push of a button. With that comes exposure to financial misinformation on social media and fraudulent advertising that didn’t exist a decade ago.
In addition to promoting positive financial literacy and empowering young people, it is equally important to help young people identify and overcome these challenges.
At Young Enterprise, we are passionate about developing the financial capacity of the next generation of young people. That’s why we created My Money Matters, a digital program designed to help young people thrive in today’s society and develop a positive attitude towards money.
Considering the impact of financial literacy in promoting social mobility will be central to our work. A recent study found that poorer children are “years behind” their peers when it comes to money management, with the financial abilities of 15-year-olds from disadvantaged socioeconomic backgrounds being similar to those of 11-year-olds from privileged backgrounds.
If we are to truly redefine the way young people view the role of financial literacy in building their future, it is critical that we enable them to develop healthy relationships with money while addressing the root causes of inequality. An ever-changing world offers young people an incredible opportunity, and through collaboration between schools, the third sector, governments and employers, we can ensure we inspire a generation of financially empowered young people to boost a recovering economy.