Teenagers in debt by 17

Over half of England’s teenagers have been or are in debt by the time they are 17, and two in three (66%) think about money every day, according to research released today. In addition, 90% worry about their money and spending but tend to think of overdrafts and credit cards as easy ways to spend more than they earn, or to buy things they couldn’t normally afford.

With levels of consumer debt now crashing through the £1.25 trillion barrier, the study by pfeg (Personal Finance Education Group), the leading financial education charity working with schools to deliver personal finance education, was conducted to assess the attitudes of today’s teens towards money matters, and gauge their understanding of the role of commonplace financial items, including bank accounts, credit cards and overdrafts. The findings show that, as a whole, teenagers have a relatively good understanding of financial matters, but that they are displaying a worryingly laidback attitude towards debt and spending; an attitude that could end up costing them dearly in adult life.

When asked why someone might have an overdraft, more than one in four (26%) teenagers claimed it was so they wouldn’t have to worry about overspending every month and a further 23% stated that it would allow you to spend more than you earn every month. Three in four teenagers correctly identified a debit card as one linked to your bank account from which funds are drawn, and the majority also knew that current, savings and business were all types of bank account.

But for 23% of 18 year olds, a credit card is something with which to buy goods and services, where parents pick up the bill and an alarming one in 20 teenagers think they don’t have to pay back their credit debt at all. One in five teenagers (19%) agreed that credit cards would enable them to buy things they couldn’t normally afford.

The study is not all gloomy news however – when asked what they would do if they were given £50, the majority of teenagers said they would spend half and save half (52%), compared to 30% who would spend it all. There was also a genuine desire to master the art of managing their money:

62% would like to learn more about investing
54% were interested in learning about saving
51% said they would like to learn how to control their spending

The report co-incides with pfeg’s expansion of its Learning Money Matters initiative to help teachers deliver personal finance education in all English secondary schools. Funded by the FSA, Learning Money Matters provides free advice, support and resources to secondary schools and teachers in England wishing to teach high quality personal finance in a way that both meets the individual needs of their school and helps children and young people develop the skills, knowledge and confidence they need in financial matters to equip them for the future.

Wendy van den Hende, chief executive of pfeg, said: “Whilst we are pleased to see that today’s young people are relatively clued up on the mechanics of spending and saving money, it’s also alarming to note how seamlessly they appear to be drifting towards an adulthood of debt. We owe it to our young people to ensure that they have the financial acumen to deal with the responsibilities of being an adult. That’s why personal finance education is absolutely vital in schools.

“We firmly believe that incorporating financial education into the existing school curriculum in a way that is relevant to young people’s lives is the best way to help them gain and retain the financial skills they need for the future. Personal finance can be tied into a whole range of existing subjects from maths to English and doesn’t have to mean extra work for already over-loaded teachers. As part of our commitment to supporting teachers, the Learning Money Matters programme employs dedicated consultants, many of whom are ex teachers and headteachers, to work individually with teachers and school leadership teams. They can help them get the best out of the resources available in a way which suits the needs of their students, engages their interest and builds their confidence – contributing to their economic well-being as they reach adulthood.”

Vernon Everitt, Director of retail themes and sector leader for consumers at the FSA, said:" Delivery of much needed improvements in the financial capability of our citizens starts in schools and Learning Money Matters is at the heart of this. It will equip teachers to be confident in delivering high quality personal finance education, empowering young people to handle their money well now and into the future.

"We are delighted to be working in partnership with pfeg in this vital area and it is really encouraging to see that there is already huge demand from schools for their excellent range of services."