Teens should be forced to learn the value of money

by StepChange Debt Charity on 06 September 2011  |  13 comments
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It's high time the Government added school lessons on how to spend money properly!

It’s a constant refrain from parents that teens “don’t know the value of money”. They squander their allowances and wages, spending money on nights out rather than paying the bills. Can this change? Can The Inbetweeners learn to budget?

It’s a stereotype that teens spend their money without a care in the world. They’re young, they want to enjoy life and they want to be free of parental influence. However this can come at a cost to their long-term financial wellbeing.

Here at CCCS, we found that in 2010, 753 of the “Inbetweener generation” (those aged 18-19 years old) contacted us to seek advice on how to deal their debt; the average amount owed was £2,254. These numbers are slightly down on 2009, but up on 2008.

Taken together it may not sound like much debt to be in, or many people contacting us for help, but if this is indicative of the wider population it’s a worrying development, especially as credit isn’t available until the age of 18.

We respect their decision to contact a debt help charity. They’re focusing on solving their problems straightaway rather than burying their head in the sand and finding that the debt snowballs.

But the fact remains that young adults shouldn’t be coming straight out of school and falling straight into debt.

Budget, budget, budget

Why are older teens getting into unmanageable debt? Around 10% of 18-19 year olds who contact us don’t know how to budget, and that this has been a key cause of their money troubles. They hadn’t understood how to spend their money wisely so they’d just spent, not taking the consequences into account.

This goes back to our continual refrain to budget (whatever your age). Knowing what’s coming in and going out of your bank account is key to staying in the black successfully. This doesn’t just help your financial health but also your mental and physical health.

We encourage everyone to use a tool like lovemoney.com’s Tracker to log their income and expenditure, and keep tabs on their finances. While that won’t eliminate the threat of falling into debt, it’ll reduce the chance of it happening (and also reducing the odds that a life shock – job loss or bereavement – cause significant financial harm).

Learning how to budget effectively is a key skill in the modern world and one that everyone must learn.

Financial education

CCCS are here to help cure the problem, but what about prevention? How do we stop it occurring in the first place?

To help prevent debt being a constant issue in the future we’d like to see compulsory financial education in the school curriculum.

There is already a non-statutory (optional) programme choice at Key Stage 3 (an equivalent of the first few years of senior school, for those of us who haven’t been a pupil for many years) called Importance of economic wellbeing and financial capability. This course includes “personal budgeting, money management and a range of financial products and services”.

We’d like to see this programme become compulsory, so kids know how to budget before they’re thrown in at the deep end without any instructions on how to swim.

This ties in with our charity’s remit. Our code of ethics encourages an understanding of personal finance:

"We aim to help people understand money in order that they can manage their money better and use credit wisely"

We know that this isn’t a new problem – our generations weren’t perfect. After all, the average age of our clients is 38 years old and the most indebted age group is the 55-59 year olds. We also know that teaching kids financial responsibility won’t suddenly make them model citizens that juggle their commitments with ease.

But our generation have had to learn from our own mistakes (if you think you haven’t, use our debt counselling service to help find a solution) and we don’t want the next generation to make the same poor choices.

If education helps them avoid debt and start out in adult life as they mean to go on, it’ll mean they do finally understand the value of money.