WHAT would you say to your 20-year-old self if you could pass on what you had learned along the way?
Would you deliver a few home truths, part with some homespun homilies or offer some practical advice on navigating the road ahead?
That’s the question that Edinburgh-based insurer Bright Grey asked 35-year-olds in a recent survey. It found that 44 per cent would urge their younger self to start saving earlier. That’s practical enough. Almost a third said they would try to clear their debts more quickly and a quarter wouldn’t take out a credit card.
More than a third said they would start a pension earlier. The message, in short, was to make sure you look after your personal finances.
Now I’m probably in the wrong job to be questioning that advice. Of course we should be trying to save more and keep our debts down. Would I say that to my 20-year-old self? I’m not sure. Paying off debts and, if possible, saving money, yes. But starting a pension? Come off it. Do any of the respondents remember being 20? Being sensible with money makes sense at every age, but we have to be realistic.
As it happens, there’s immense pressure on 18 to 20-year-olds to be smarter with their money than many of their elders were at that age.
They’ve got little choice – if they go to university it will be at an expense that most of us were spared. Those in university already are set to graduate at a time when youth unemployment is unacceptably high, given the weak efforts at both Scottish and UK government level to address the problem.
Three months ago, the Scottish TUC reported that the number of Scots aged 18 to 24 and out of work for more than a year has risen by more than 1,100 per cent over the past five years.
The greatest concern is the social consequences of long-term youth unemployment. But on a more practical level there’s also the impact of unemployment on the individual’s long-term finances. Many will pay the price for the rest of their lives.
It’s no secret that financial literacy in the UK is itself in crisis, not least – but not only – among younger generations. We are doing far, far too little to tackle this.
I’ve been writing about financial literacy for the best part of a decade now, generally railing against a piecemeal approach to personal finance education that falls a long way short of the emphatic measures needed.
Good intentions have never been in short supply. Action, unfortunately, has – progress in addressing the problem has been painfully slow, both in Scotland and across the UK.
Consumer group Which? last week called for more action on personal finance education when it published new research showing that 18 to 29-year-olds have the highest debt to income ratio of any age group. They owe 47 per cent of their annual income on average, compared with the 21 per cent average across all age groups.
If we can’t give younger people stronger financial foundations on which to build their adult lives, we can at least help them develop their own. That means investing in financial education, not only in schools but in higher education, workplaces and in the community.
If we can’t help them secure meaningful employment – and unpaid shelf-stacking in a supermarket really doesn’t count – we can give them better tools for negotiating a financial landscape littered with potholes.
If we’re to minimise the long-term consequences of the financial crisis, improved financial literacy is absolutely essential. We’ll all pay the price for years to come if we can’t deliver this, socially and financially.
Politicians have talked and talked but, as so often happens, produced precious little of practical value. Perhaps this is an opportunity for the banks that have helped create the mess we’re in.
They bang on about social responsibility, fairness, leadership and delivering for customers, but it rarely amounts to more than feel-good gloss for the annual report.
Working with government, local communities, schools and workplaces, banks are in a position to promote financial literacy in a practical sense. What better way for the banking industry to mend its battered reputation than by spearheading a new financial education drive?
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Wednesday 22 May 2013
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