Friday, 7 December 2012

Modern Young Finance: weekly round-up

A weekly round up of all the developments in the world of young people and financial services. @SophieRobson2


The Chancellor's Autumn Statement this week was greeted with mixed responses. Although slight increases in personal tax allowance (which will rise to £9,440) and increases to the ISA contribution limit (to £11,520) and for businesses, a 1% cut in corporation tax were welcomed, these changes were thought to be too small to really have an impact on people's working lives, especially those of young people, who are increasingly being squeezed by a lack of employment opportunities and steadily rising rental costs, amongst other things.


It was also reported this week that even second time buyers are turning to the Bank of Mum and Dad for help in upgrading their homes, as upgrading to a house with a second bedroom can set buyers back an average of £91,000. So even if you do manage to buy that first home, your troubles are far from over.

The Autumn Statement brought some relief for first-time buyers: although there was no mention of a return to the stamp duty holiday, the Chancellor did promise to continue with the Funding for Lending scheme, which enables banks and building societies to borrow from the government in order to accept more mortgage applications from first-time buyers who might not have built up substantial deposits. However, the deposits that most mortgage lenders require are still too high for most first-time buyers, so it is unlikely that this will have much impact in the short to medium term.

The government will also increase the amount of bankable annual gains from investments by 1%, and is also set to expand the number of investments which might be included on a list of stocks and shares lsas - which could be good news for young people who already have investments - as they are the group most likely to be investing in higher risk categories, and stand to benefit the most over the longer term.


Some welcome news from the world of financial education, albeit from the United States, as a recent report suggests that young people (aged between 16 and 29) may actually be one of the most financially literate age groups, because of the importance that they place on getting a decent report on their savings accounts. Recent research found that 25% of people in this age group put saving as their top personal finance priority, compared with 9% in the over 65s category.

Nebraska's board of education proposals for standards in social studies has put new emphasis on personal finance, as a result of the struggles many young people have faced as a result of the recession. 

Over in Malaysia, a new financial literacy programme, "My Finance Coach" has been launched by Allianz. This initiative was founded in Germany in 2010 and  aims to improve the money management skills of young people, by training volunteers to be My Finance Coaches and getting them to run classes on money and finance for people aged between 11 and 18.


Last week, we discussed several new payments platforms designed specifically for children. This week, a similar system has been set up in the US, called This website allows parents to control the money their children can spend online, while allowing children to manage money to buy things online. Crucially for the parents, it doesn't actually hold any money, which means that no personal information is needed for registering, but instead it operates as more of a management system, so that children can see how much they have saved and how much more they need to save. In turn, parents can keep track of how much money is in the account and decide on the items that their children can buy. A number of merchandisers have already signed up to the scheme, including Claire's, a jewellery store.


A poll by law firm Irwin Mitchell found that more than half of businesses want to see the default retirement age reinstated to free up employment opportunities for able younger employees. The default retirement age was scrapped in April 2011 in an attempt to eliminate age discrimination and increase tax receipts. Many of the firms surveyed were finding that many younger employees were leaving to join rival firms because of the bottle neck that was being created in their current firms by older workers staying on past the traditional age of retirement.


The growing problem of debt amongst young people was again brought to our attention by the story of Toby Thorn, 23, who took his life when he ran into debt as a result of student and credit card debt. This is compounded by increasing rental costs - by some estimates, these have risen by 20% in some parts of London, while wages for under 30 year olds have fallen by between 6% and 10% over the last decade.

Payday loans once again made the headlines this week - for the wrong reasons - as it emerged (in research by Insolvency firm R3) that nearly one in ten people were considering taking out a payday loan to help meet the costs of Christmas. Step Change Debt Charity also reported that the number of people seeking help with debt from payday loans has soared by 300% in the past 2 years. It might be worth taking a closer look at how this problem develops once the new interest rate caps are put into place...

There was some good news this week though for those who pay out regularly on train fares. The government agreed to cap fare increases at 1% above the rate of inflation rather than 3%, which should help to ease the burden on regular commuters.

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