Research Summary on Young people and Financial Matters : By FSA

Young people 15 - 19 face significant changes in their lives; it is the time when they leave statutory education and move into further education, higher education and employment; it is the time when they become independent and may even leave the parental home. All of these changes require young people to make financial decisions and to actively participate in the financial services market for the first time. However, as this research shows, young people show little interest in financial matters (as opposed to just spending money) and were very reactive in seeking information about it.
Perhaps unsurprisingly parents were the main source of information about financial matters. The young people felt their parents understood their circumstances, would have their best interest in mind and could tailor advice and information even though some of this information might be limited.  The key role of parents is highlighted by the fact that 88%∗ of 15-19 year olds said that their parents were an important influence on their decisions regarding money. All parents in our sample warned their children to avoid debt and attempted to teach them about the importance of saving, whether or not the parents themselves were savers.  However, despite parents’ best efforts to convey the ‘right’ information to their children about money matters, actual parental behaviour regarding financial matters was a far more powerful influence.

Saving was thought to be a good idea in theory, although each young person had a different level of practical success as all liked the idea of spending money, having a good time and keeping up with fashion. Most young people believed there were two kinds of debt: necessary debt such as mortgages, car loans and student loans, and overspending such as credit cards, unspecified loans and overdrafts and all were concerned about whether they would be able to control themselves if they were given a high credit limit.

Schools were considered by many to be ideally suited as a channel for learning about financial matters but few recall the subject being covered (over 40%* rated their schools coverage of managing money as poor).  They also stressed that the way financial information is imparted is crucial to effective assimilation – it has to be made interesting and relevant otherwise it would not be absorbed. Possibly as a result of their lack of interest and reliance upon parents for help in financial matters, most young people said they did not shop around for financial products and services.  This contrasts to their behaviour outside the financial arena, where most of the young people felt that they commonly shopped around for the best deal, particularly when it came to items such as clothing, mobile phone handsets and tariffs.