Monday, 28 January 2013

Modern Young Finance: Weekly round-up 4



There was bad news this week for the UK economy, as it was revealed that it shrank 0.3% in the last three months of 2012. This led to renewed concerns that the UK could slide back into recession. It remains to be seen how this might affect young people in the near future, although it is difficult to imagine how they could collectively be much worse off, being disproportionately affected by almost every policy decision and economic twist and turn.

The latest ONS figures on unemployment underpinned this. The overall unemployment figure fell by 37,000 to 2.49 million - the lowest level since May 2010. Unemployment figures for those aged between 16 and 24, on the other hand, actually rose by 1,000.

However, there is some positive news for current account holders, as the OFT drew up new recommendations in its review of bank current accounts.

And there are more news and views from experts on the future of financial education.

Financial Education

The debate about making financial education compulsory in schools rages on. A week after Thomas Docherty MP presented his private members' bill to Parliament, the Financial Times dipped its toe into the debate (no link here due to FT copyright, but click here to access the website. It looks at a school in West London where very sophisticated financial education lessons take place. Pfeg, MyBnk and DebtCred are all mentioned. As I write, this, the All Party Parliamentary Group for Financial Education for Young People's 150 page report is being looked over by the Department for Education.

Meanwhile Redington, the independent investment consultancy, has launched RedStart, a financial literacy and entrepreneurship education programme, which aims to "build confidence, drive and ambition in young people in London". It hosted its first crash course with a group of 12 and 13 year olds from Lister Community School in Newham, East London. See here for more information on the scheme.

Investments and savings

Last week, I discussed options for first time buyers looking to get on the property ladder, particularly Barclays new Family Springboard scheme, which allows buyers to get a decent mortgage with just a 5% deposit... providing their parents - or another relative - are willing to link some of their savings to the loan.  This week, The Guardian has laid out more alternatives to Family Springboard, including Lloyds TSB's Lend a Hand scheme (which requires the relative to put up to 20% of the house value into a linked account, but in return for a slightly better mortgage rate - as little as 3.99% for a Lloyds current account holder). Encouragingly though, there seem to be a number of similar deals out there as well, notably the Aldermore Family Guarantee Mortgage, where you can get a 100% mortgage, as long as a relative can guarantee borrowing above 75%.

Anything that helps young people get in control of their finances, and gives them the chance to escape the woes and insecurities of renting, has to be a positive step. However, I do worry that this will exacerbate the divisions between the haves and have nots - and lead to even more disaffection amongst those from less wealthy families.


The Office of Fair Trading has raised concerns over the limited choice of personal current accounts. Its latest review found that banks are not doing enough to make accounts good value for money for consumers. It also criticised the larger banks' hold over the majority of the market: it found that Lloyds, RBS, Barclays and HSBC make up 75% of the market (although it did acknowledge newer entrants, such as M&S Bank and Metro Bank). The news that the Co-operative bank is to close 37 branches across the country does not help matters.

Young people stand to lose out if banks remain uncompetitive and ill equipped to meet customers' needs, especially if they find it difficult to change accounts easily.

Encouragingly, the OFT also included some recommendations in its review. These include exploring the option of retaining account numbers, even if a customer moves to a new bank (in a similar manner to mobile phone numbers), making annual summaries of accounts available throughout the year rather than simply being sent one a year through the post (to make comparing accounts easier) and better advertising of a text alert system which lets customers know when they are nearing their overdraft limits. I look forward to seeing these recommendations being put into practice - after all, they appear genuinely innovative and relatively simple to implement across organisations. (Incidentally, an earlier blog on the Fairbanking Trust highlights some of the most customer-centric accounts on the market today).

Employment and Education

With the news from the ONS that youth unemployment has risen, and a study by the IPPR think-tank that these figures could increase even more over 2013.

Luckily, there is some hope, as a new initiative is about to be launched by the Financial Skills Partnership. The GetinGeton programme is an industry led e-learning project aimed at giving 16 to 19 years the necessary skills and knowledge to break into the financial and professional services sectors. Young people taking part will have the chance to take part in online learning modules and access to professionals in the industry who will be on hand to have e-conversations with them about careers and working in the industry.

The FSP is still looking for e-mentor volunteers for the scheme, which will begin in April 2013. Click here for more information on signing up.

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