Money makes the world go round, but when it comes to understanding how it works, many young people are still left in the dark.

Schools might teach you algebra, history, or how plants make food from the sun, but they often skip over something just as vital: how to manage your money.

And let’s be real, knowing how to handle your cash is just as important as knowing how to pass exams.

Financial literacy isn’t just about knowing how to save a few quid. It’s about understanding the bigger picture, how money works, how to make it work for you, and how to avoid getting into sticky situations.

With the rise of easy credit, buy-now-pay-later schemes, and the lure of social media influencers flaunting their lavish lifestyles, young people are more exposed to financial risk than ever. This makes financial education not just important, but essential.

Let’s start with the facts. The Money and Pensions service reported last year that only a third (33%) of children recall learning about money in school and finding it useful. In the UK, where credit is so easily accessible, this is a worrying trend.

Without this knowledge, young people are at risk of making poor financial decisions that could haunt them for years to come. The problem is also about confidence.

Many young people feel overwhelmed by financial products and jargon, which can lead to avoidance. This is why it’s crucial for financial literacy to be taught early and in a way that’s relatable and easy to understand.

Schools have a massive role to play in closing the financial literacy gap. While some schools do offer personal finance classes, they’re often optional or only cover the basics. This isn’t enough.

Financial education should be as integral to the curriculum as Maths or English. What’s the point in knowing how to calculate the area of a circle if you can’t calculate the interest on your student loan?

Teaching it in schools isn’t just about equipping students with the skills to budget or save. It’s about giving them the tools to navigate the real world they’re about to enter so they are prepared to make informed decisions that will affect their financial future.

While schools are vital, parents and guardians also play a crucial role in teaching financial literacy. Young people often learn their money habits from home, whether it’s how to save, spend, or manage debt.

If parents aren’t confident with their own finances, this can be passed down to their kids. This is why it’s so important for parents to educate themselves and have open conversations about money with their children.

But let’s face it, not everyone has parents who are financial whizzes. This is where online resources can step in to fill the gap. There are plenty of tools available that can help young people learn about money in a way that’s engaging and easy to understand.

From budgeting apps such as YNAB (You Need a Budget) to online courses like some at The Open University, there’s no shortage of resources out there.

We’re living in a digital age, and that comes with its own set of financial challenges. With the rise of cryptocurrency, online trading platforms, and digital banking, the financial landscape is changing fast.

While these innovations bring new opportunities, they also come with risks. For young people, who are often early adopters of new technology, understanding these risks is crucial.

Financial literacy is about understanding how to protect yourself online, avoid scams, and make informed decisions in a world where money is increasingly digital. This makes financial education more relevant than ever.

Investing in it isn’t just about preventing young people from making mistakes, it’s about setting them up for success. When young people understand how money works, they’re more likely to make smart financial decisions that lead to long-term financial stability. This can have a huge impact on their quality of life, from reducing stress to giving them the freedom to pursue their dreams without the burden of debt.

Financial literacy also contributes to a healthier economy. When individuals are financially savvy, they’re more likely to invest, save, and spend wisely, which benefits everyone. 

In fact, a recent study from business group CBI found that prioritising financial education could add nearly £7 billion to the UK economy each year. In this way, financial education is both a personal issue and a societal one.

In a world where financial decisions are becoming increasingly complicated, the need for financial literacy among young people has never been greater.

Schools, parents, and the wider community all have a role to play in ensuring the next generation is financially savvy. By making it a priority, we can empower young people to take control of their financial futures and avoid the pitfalls that so many fall into.

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A ‘wage’ refers to the monetary compensation paid by an employer to an employee in exchange for the work performed.

In the UK, wages can be paid on an hourly, daily, or weekly basis, and are subject to various regulations to ensure fairness and adequacy.  

National Minimum Wage (NMW) and National Living Wage (NLW): 

• The National Minimum Wage is the minimum pay per hour that most workers are entitled to by law. The rate varies depending on the age of the worker or whether they are an apprentice. 
• The National Living Wage (NLW) is a higher rate that applies to workers aged 23 and over. As of April 2024, the NLW has risen to £11.00 per hour. 

Types of Wages: 

• Hourly Wage: Paid based on the number of hours worked. Common in part-time or casual employment. 
• Salary: A fixed regular payment, typically paid monthly, but often expressed as an annual sum. Salaried workers may not receive extra pay for overtime. 
• Piece Rate: Payment based on the amount of work completed or units produced. 

Overtime Pay: 

• Employees may be entitled to higher rates of pay for working beyond their contracted hours. There are no statutory requirements for overtime pay in the UK, but it must not fall below the NMW or NLW. 

Deductions: 

• Employers may make deductions from wages for taxes, National Insurance contributions, and other reasons such as pension contributions or student loan repayments. Deductions must be lawful and agreed upon in the employment contract. 

More Words of the Week

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Mouthy Money’s latest article is from Finance Dee as she discusses the various ways to improve your money mindset.

What is a ‘money mindset’?

A money mindset is made up of your attitudes, thoughts, beliefs, emotions and behaviours towards money and how you handle it. This is primarily formed based on your upbringing, conversations about money you have had, and any knowledge you have acquired about money.

How to identify my money mindset?

Here are a few questions you can consider asking yourself to get a feel of what your money mindset or your attitude towards money may be:

• What was I taught or not taught about money growing up – How does it relate to what I think or feel towards money now?
• How do I feel when talking about money with others?
• How do I feel/approach reviewing my personal finances in detail?
• How do I envision my future looking in terms of my personal finances?

If you find yourself generally skewing towards anxiousness, uncomfortableness, or straight avoidance when talking, thinking or reviewing your money status, you may have a pessimistic view on money.

And there could be very good reason for this based on your lived experiences! The great news is though, mindsets can absolutely be changed with the right reflection and action steps.

How to improve my money mindset?

Let’s talk about four ways you may be able to improve your money mindset from pessimistic to optimistic:

1. Work on your financial literacy

We are all well aware personal finance isn’t something we are taught during formal education, but this does not mean it is not an essential skill we need to navigate life. Improving tour financial literacy, namely what you know and understand about personal finances, is a great way to improve your money mindset.

Whether that’s through reading personal finance books, listening to podcasts, browsing through blog articles, or watching YouTube videos, demystifying the seemingly frightening world of personal finance can quickly show you the power and ability you have to control your own finances.

2. Align your life values and goals to your finances

We all have dreams and desires, and truth be told many of them are probably underpinned by finance in some way. It’s important to make sure that your personal finances align with what you value in life and what you’re working towards.

If home ownership is what you value, that’s where a good portion of your money should be directed until you achieve your goal. If traveling is what you value, then your budget should allow room for you to afford your travels.

3. Address your limiting money beliefs

This one may sound a bit airy-fairy, but there truly is power in addressing your beliefs that impose limits on your life. If you believe you will never earn enough to be comfortable or save for your future, you’ve already put yourself in a box by believing you won’t be able to.

A good way to address limiting money beliefs is to first recognise them, write them down, and make a counter-statement against those beliefs. Then the hard work really begins to ensure your thoughts and beliefs about money stay positive.

4. Don’t dwell on past financial mistakes:

Learn from them! It is a huge waste of time and energy to dwell on what you should or could have done, instead of focussing on what you can do now. Mistakes are there to teach us, and are great life lessons which can help us shift our money mindsets into a positive direction.

Photo by Jason Strull on Unsplash

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Half of UK parents struggle to talk to their children about money, according to a new study.

Some six in 10 parents don’t regularly discuss finances as a family according to the study, by Blacktower Financial Management.

Contrary to the number of parents struggling to talk to their children about money, nearly four in five (78%) worry about their child’s financial future and an additional 84% of parents appreciate the importance of helping children learn about money.

So, despite all this, why do parents still find it so hard to discuss finances with their children?

Children and money

The findings show that 59% of parents believe their children should grow up without any active financial education.

However, a lack of understanding of basic finances can leave children falling behind as they grow up and struggle to manage savings and outgoings.

John Westwood, group managing director, at Blacktower Financial Management says: “It’s eye-opening to see the large percentage of UK parents struggling to talk to their children about money even though parents know they are the biggest influencer over the development of their child’s money management skills.”

Children and money

Even if they don’t learn about finance at school or in families, children still gather information on the internet on money apps or social media platforms.

Three in five (61%) children in the UK between the ages of 10 and 15 use an app to manage their money.  This includes half of the 10-year-olds (49%), while the figure rises to over two-thirds of 15-year-olds (68%) and 71% of 14-year-olds.

Top tips for educating children about money

Talking to children about money is a crucial step in their development and helps them to become financially independent as they grow up.

Here are a few easy steps on how you can speak about money to your children:

Shopping with your child

Let your child accompany you to the supermarket when doing your weekly shopping. A boring chore like shopping can become a life lesson for your children when you educate them about budgeting and the value of money.

You can also let them pick what they want for lunch, letting them make up their minds about what to buy or what their priorities are.  

Let your child make a mistake

The best way for children to grow and mature is to let them make their own mistakes. If you let your children use all of their pocket money as they please, you can talk to them about why it’s important not to use all of your money at once.  

The more freedom you give, the more responsible the child can become – especially in how they decide to spend their money.

Introduce cash at an early age

Introduce the concept of money at an early age to help them understand what terms like owing, borrowing, owning truly mean. This can nurture a feeling of confidence when reaching a certain age and looking at their bank accounts, throughout adolescence and adulthood.

Use pocket money as exercise

Invest into a set amount each week to your child’s pocket money. This will allow them to make their own weekly budget, feel more comfortable with a certain budget as they grow and maybe even save up for larger purchases.

Should children use virtual money?

Think about downloading a money-saving app for children and teenagers. Digital financial literacy is an important step towards a good financial education. This will become particularly useful when opening student accounts with overdraft facilities.

You can also teach your child about buy-now-pay-later schemes appearing on most retail sites. These can seem appealing but, without financial literacy can lead to debt.

Photo by Jonathan Borba on Unsplash

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Financial education is lacking on the UK curriculum, but some financial experts say it isn’t the right way to help people tackle their money anyway.

In a roundtable of Financial Technology (FinTech) firms hosted by Mouthy Money in partnership with MRM communications – a group of leaders in the industry gathered to discuss a range of issues around money.

One of the key discussion points was of financial education and whether it really helps people improve their personal finances.

The panel was mixed in its opinions.

“I don’t think we should try and educate anyone. It doesn’t work,” says MoneyHub’s Samantha Seaton.

“I’m reminded of that big study in the States, about 10 years ago, about consumer response to APRs. The group that received all the education simply made poorer decisions faster, with more confidence.”

She goes onto explain that, in her view, educating customers about the specific decisions they make is not something FinTechs should be worrying about. Instead they should focus their energy on good data, good tech and getting the decisions right for the customer.

“If you’re selling financial products, with the technology we have available, surely we can just make sure we get it right. I honestly don’t think education’s the answer. But let’s not also confuse education with transparency. The latter is vital and we need to give people the facts.”

Useful tools

Plum’s Elise Nunn agrees but only to an extent. For her, the advantages that FinTechs bring to the table lie in being data-driven, and understanding the customer in ways incumbents cannot: “It’s about working out what the key pieces of information are, and surfacing them in the right way.

“Online mortgage broker Habito has a true value calculator to show users what’s important – like interest rates and what you’ll pay over time – and what isn’t. That’s better than giving someone a dense piece of literature and hoping they’re academic enough to understand it.”

What’s clear is that technology can put options on the table – and then work out what the impact of the decision will be. This, says PensionBee’s Jonathan Lister Parsons, is what FinTechs do so well, and so differently.

“If you can bring the data together – and get the algorithms to present the options – then the role of education in FinTech is to describe what the real-life implications are on an individual,” he explains.

“Much of this is in the future but the potential is clearly there. And this is another reason why the banks haven’t done well because they don’t analyse the data and apply it to their customers’ lives properly.

“For example, in housing, I’ve never seen a compelling tool that helps you decide whether to rent or buy that’s personalised to your life. You can educate someone all day about interest rates and investments – but the big opportunity for FinTech is to show people what this means in their lives.”

Consumers or customers?

Some FinTech leaders believe education plays not just one role but two: educating consumers more broadly and educating specific customers. The former is something FinTechs will always struggle with, given the scale of the issue and the absence of a comprehensive personal finance component in the UK’s national curriculum.

As Rishi Zaveri from Lendwise puts it: “There’s a structural problem isn’t there? People just don’t know enough about finance, because it’s not a core part of the school curriculum. We’ve got three years’ worth of data that tell us when we work with people to help them understand the issues, we make a big difference.

“If you extrapolate that out you have to conclude there’s a big onus on financial services providers to ensure we educate people about APRs, about loans, about money. Some will get it and some won’t, but it’s something we should be doing because the opportunity cost can be crippling: just look at payday loans.”

Wombat’s Kane Harrison agrees: “We have a learning hub, which explains shares and bonds and so on, and we’ve seen quite a lot of engagement here. The evidence suggests it creates a comfort level for users. And this helps us achieve our goal of creating good habits over the long run.”

But even within the process of working with FinTech users to explain finance, there are different strands of education. Elise Nunn is convinced there’s a big difference between the why and the how.

And, in her firm’s experience, it’s far more effective to educate people on why they should do something – as opposed to how the products work – because that’s the best use of the data. This is crucial to building that bond, generating trust and getting people to come back.

This is where education and engagement intersect. For FinTechs, this is the sweet spot.

“Our industry can do a lot more on taking responsibility to support customers. And this will go a long way to helping trust,” says OpenMoney’s Anthony Morrow, “but actually, I think the issue about education and engagement is more that bank terms and conditions are Byzantine in their complexity – and they’re asking lay people to read them and make a decision with huge implications.”

Rishi Zaveri couldn’t agree more: ““We were determined to break with the norm when it came to the legal language that terms and conditions documents are written in. We sat down with our lawyers and spent a whole day ensuring the document was as brief as possible and in plain English. And we got a fair amount of praise from the FCA for doing it.”

As Samantha Seaton adds: “Let’s not let compliance run this,” because it’s the data – and the way FinTechs can use it – that has the biggest potential difference on peoples’ lives.

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