Growing generational inequality
The generational inequality in the UK is astounding. Young people are at a huge disadvantage. In contrast to previous generations, they currently and will in the future:
This is why educating children about personal finance matters. Children need to be equipped with the information to make the right financial decisions if they are to overcome the many challenges they will face.
The financial education gap
I was lucky. As a child, I had parents and grandparents who taught me about saving, the benefits of compound interest and eventually, investing in the stock market. This equipped me with the knowledge to make the right financial decisions. But the vast majority of young people growing up in the UK today don’t have that luxury and, astonishingly, there is still only limited financial education available in schools.
Children need the skills to develop financial independence; kids who can’t manage money, become adults who can’t manage money. Currently, 50% of people in the UK don’t feel comfortable managing their money.
Fortunately, organisations like MyBnk, the UK’s leading specialist financial education charity, are working to address the widespread issue of financial illiteracy. MyBnk runs programmes for young people aged between seven and twenty-five to increase their financial knowledge. One of the core ways they do this is by sending trainers into primary and secondary schools to assist kids in the development of good money habits.
I spoke to MyBnk’s CEO, Leon Ward, about the challenges young people are facing and the valuable work they are doing. Leon has spent all of his career working for youth charities. His own challenging family background inspired his commitment to the charity sector: “I grew up in an extremely poor household in Grimsby. My mum was an alcoholic, she passed away when I was 21. Charities stepped in and filled the gap - putting me on a decent pathway.”
The challenges young people face
There is a tendency - Leon points out - for older people to compete with younger generations on how bad their financial situation was when they were young. He finds this divisive attitude bemusing: “The one thing that unites us is that none of us had a formal financial education. So older people made poor choices around their finances when they were younger, too, because no one taught them how to do it.”
Leon points out that the need for financial education is growing, with two particular evolving challenges impacting young people’s financial futures.
The first, is the proliferation of financial service products: “We are bombarded with financial services and products now, in a way that can cause detrimental impacts to our financial health. So buy now and pay later, low interest or zero interest credit - we've grown up on cheap money. We’re, to some degree, addicted to it.” He also notes that easy access investment and gambling platforms pose a real danger to those without the financial discipline to approach them cautiously.
We need to equip children to navigate the bewildering range of financial options they have. Ultimately, Leon says, this is about “giving children the knowledge to make informed financial decisions.”
Secondly, he says that financial fraud is a real and growing threat: “Most people think that it's older people that fall victim to that, but that's not the case. The evidence shows us it doesn't discriminate according to age… and the scams are becoming so much more complex, so much more professional, they look real. They are everywhere and recent research shows us that young people are in fact more likely to fall foul of scams.”
Plugging the gaps in financial education
MyBnk starts educating those as young as seven about the rudiments of finance. As Leon stresses - money is something we start interacting with at a very young age, and yet we get no formal support with it. Starting early is best: “It’s the easiest time to do it. Children are really capable and absorb information like sponges. They’re also already seeing things and learning about money, because they're watching their parents, carers and their friends.”
MyBnk helps children connect the dots: “Kids know their parents are going to work, they know what money is because they see it, but they don't necessarily connect that you get paid for going to work. And then you have to pay out all of the bills and household expenses.”
It starts with imparting the fundamentals and the building blocks for good money habits: “So we take them through the basics of banking, borrowing, saving, we teach them about delayed gratification. So they understand if I earn some pocket money, I might be able to buy a packet of sweets but if I save up pocket money, I could buy a multipack of sweets.”
However, it’s not just the basics that MyBnk teaches children - they’re being taught things that adults (this author included) struggle with: “Even in a primary school session, the kids will learn about APR and AER, and they will be able to tell you the difference by the end of the session. So it's not shying away from technicality, just because we as adults think it's complex because no one taught us how to do it.”
A lot of the methods MyBnk uses to teach kids involve gamification. Leon recalls seeing a session with year fives in a Welsh primary school in which they role played being bankers or borrowers: “We helped them think about whether you would lend money to someone you’ve never lent money to before? No. So this is your credit score and your risk profile, and we start introducing those things.”
They also encourage the students (even in Primary schools!) to consider how they would evaluate a potential provider: “We put up a number of banks around the room and children have to role play being a bank, a borrower and a saver. They have to choose banks - navigating interest rates and choosing between banks that look ‘cool’ with banks that do not but have better rates. We start to help them understand the provider is not the important element - the terms and conditions are. This is really powerful stuff. ”
One of the next steps in the MyBnk journey could well be the adaptation of these materials for the digital spaces children spend so much time on, such as the gaming platform, Roblox. Roblox is committing to support 100 million students learning on their platform by 2030 and the success of role playing and tycoon games there offers a real opportunity: “We would love to work with a partner so some of our content was embedded into a game”.
A number of finance brands have already dipped their toe into this digital world, including the Royal Bank of Canada and Fidelity. Fidelity’s Roblox experience: ‘Pancake Empire Tower Tycoon’, combines financial education with entertaining gameplay to help users grow their knowledge and confidence through spending, saving, and investing activities.
Hopefully finance brands will recognise the benefits of partnering with organisations such as MyBnk to further the cause of financial education. These partnerships seem like a win-win for children and financial institutions; offering the opportunity to build early brand affinity with potential future customers, whilst addressing the systemic issues in kids’ financial education.