A quick overview of the financial literacy landscape

Financial literacy and the lack thereof is a major concern in the UK. Financial products are now more complicated than they used to be, and can be bewildering to all but the most sophisticated investors. Sadly, at the same time, many young people are not engaging with the world of personal finance, compounding the problem. It is important that they are taught sound money management lessons from early on in life. So, let's take a look at some organisations which are helping young people and their families to do just that, and some of the initiatives they are using to achieve their goals.

The Money Advice Service is perhaps the best known organisation aimed at helping people of all ages to understand money and learn money management. It advertises across a variety of media, including TV, radio and online, as well as on billboards. MAS also does much research into the impact financial literacy initiatives are having on those who come into contact with them, concluding that the most important issue surrounding money matters is behavioral: in other words, people are influenced by those around them and by emotional factors, so they need to be taught to learn the habits of sensible financial planning - from early on, and through a variety of influences. This is underpinned by the fact that more than two thirds of parents do not feel well-qualified to advise their children on anything money related.

Another organisation in this sector is pfeg, (the Personal Finance Education Group). Pfeg's mission is to help school children (and their teachers) understand personal finance, and works with schools to offer a rigorous and dedicated curriculum for young people aged between 3 and 16. Looking at areas including effective money management and becoming a critical consumer, it offers consistency by using four areas as a bench mark to help young people understand personal finance. Pfeg goes further than this though, and works with a number of schools which are now personal finance 'Centres of Excellence': in these schools, pupils of all ages receive some financial education, and teachers, including a 'champion' at each school, are trained to teach this material effectively. Pfeg is also working with a number of universities to ensure that trainee teachers are financially literate.



If pfeg concentrates on classroom-based learning, then MyBnk, a social enterprise, does the opposite. This company runs money management workshops for young people aged between 11 and 25, and was conceived after its founder, Lily Lapenna, spent time working on a micro-finance project in Bangladesh and was inspired by the financial savviness of the women who were involved with the project (they had set up small businesses using loans, and were repaying these, on top of supporting families, often on their own). MyBnk uses practical lessons to teach about personal finance, recently setting up a scheme where school children run a bank using their classmates' savings as deposits (with special dispensation from the FSA). They can then use this money to provide interest-free loans for those in their local community, so they get into the habit of saving, and also learn important lessons about the mechanics of the financial services industry. It has also launched Unidosh, aimed at those going to university.

The ifs School of Finance is also involved heavily in this area, and was the first body to offer qualifications specifically in personal finance to those aged between 14 and 19, so roughly GCSE, AS-level and A2 levels, as well as, latterly, degrees in the area. This program seems to work as a powerful motivator for young people, especially those who are less interested in academic subjects: it gives them the chance to gain a qualification in something that will be of practical value throughout their lives. The ifs also runs a virtual stock exchange for Year 12 pupils, which has proved extremely popular as a useful and practical introduction to the world of finance and investments, as well as teaching about how to manage risk.



Several of the large banks run programmes aimed at helping young people understand their finances and Lloyds Banking Group's Money for Life programme is one of the more established. Aimed at young people, one of its objectives is to enable them to learn by teaching other people important lessons in managing their money, which was highlighted in its recent Money for Life competition. Here, a £500 grant was offered to those who could most successfully improve the money management skills of those around around, while, at the same time improving their own - amongst the most memorable entrants included a group who organised a buffet party for 40 people for £40, as well as running a series of sessions for those in their local community on healthy eating on a budget.

So, much work is being done in this area, as the above examples illustrate. But more needs to be done, and more collaboration between organisations is vital if we are to begin to undo some of the bad financial habits that have become entrenched in the UK in recent decades.

"#yourmoney: everything you need to know about earning, spending and saving" by Jeannette A Lichner

Achieving financial independence is a rite of passage for all young people. Sooner or later, most 16 to 25 year olds will have to take responsibility for their financial arrangements, making important decisions that will shape their lives in the years to come. This could be funding their way through university and navigating the world of student loans and tuition fees, beginning a first job, or even moving to a place of their own. The problem, however, that many young people (and their parents) face is that each of them will have different requirements, budgets and levels of understanding of money matters and it can be difficult to address these issues before they become a concern. All too often this is because of the lack of financial advice available for this age group.

“#yourmoney: everything you need to know about earning, spending and saving ”, is a new guide which aims to do vanquish these obstacles – to teach young people about some of the jargon and terms they are likely to encounter and helps them make financial decisions with greater confidence. Jeannette Lichner, the author, who has had a long and distinguished career in finance, is well qualified to shed light on some complex terms, such as pensions, savings accounts, including ISAs and is even able to explain the difference between AER and APR!

There are helpful tips on just about everything from budgeting, to using credit cards, to understanding the tax which is coming out of your monthly salary. Other useful areas covered are insurance and buying a car. Visual elements in the book help too: Lichner doesn’t just talk us through a credit card statement, or a payslip, she actually includes one as an example. The same goes for budgeting, as we see how a budget might look on a spreadsheet. In fact, the instructions we are given on how to make up a budget are so rigorous and easy-to-follow, covering the entire spectrum from collecting and recording receipts, to dividing expenditure and income into categories, that it seems successful money management is a job in itself.

And this drums home the fact that almost all decisions you make and actions you take are related in some way to money management. As the book says, “Every time you use your mobile for a call or a text, or hop in the car, you are spending money”, and it therefore follows that you should keep track of everyday expenditure, such as the mobile contract you are on, or how often you eat out. However you choose to make or spend your money, you are always going to have to manage it, and you are usually going to have part with a large portion of it to pay for essentials such as bills, rent and council tax, unless you are lucky enough to still be supported by your parents.

In my opinion though, the feature of this book that sets it firmly apart from other how-to guides is the recognition that money management is intrinsically linked to a person’s upbringing and mind-set: the environments they find themselves in, the people they associate with, the career aspirations they have. Many of the financial decisions we make are influenced by the values we attach to money. Some of us may be savers by nature, others may be spenders, but unless you understand why you spend money and where you spend it, financial knowledge alone is not enough. 

“#yourmoney” goes a long way to helping young people understand all aspects of money management – and is surely a must-read for anyone embarking on the journey towards financial independence.

Making entrepreneurship child’s play. "Enterprising Child" by Lorraine Allman

Many children dream about 'making it big' when they get older – of driving big cars, living in mansions and swimming around in oceans of money. Parents, in turn, dream of their children achieving their potential, making the most of their talents and being happy. The problem is that as they get older, these dreams all too often dissipate, coming to nothing. A major reason for this is the fact that many young people do not have the practical skills to make their dreams a reality, and cannot turn their passions into something profitable.

Lorraine Allman’s new book, “Enterprising Child” offers a much needed framework to help young people, and parents, realise their ambitions. Aimed at guardians of 4-14 year olds, it offers practical tips and helpful activities to help parents support their children in developing the skills needed “to make the best of the opportunities and challenges life presents whether as an employee or as a business owner”.

Entrepreneurship can be a difficult topic to quantify. After all, many successful entrepreneurs (in the narrowest sense) can be reluctant to reveal the ‘secrets of their success’, perpetuating the myth that entrepreneurs are born and not made. With entrepreneurs in general, it is difficult to unpick what it is that made them successful in the first place. “Enterprising Child” does a good job of investigating what these traits are - identifying five separate areas: perceptions of possibilities, ambition, risk and resolve, teamwork, and value.

Allman then goes on to suggest activities geared at developing these traits. The guide is packed with common sense ideas and workable examples, such as getting children involved in the planning stages of a family outing, so that they learn about organisation and time management, or teaching older children about body language, so they can improve how they communicate with other people – all vital life skills. There is also a helpful “What your child is learning” section towards the end of each chapter, which helps to put all the information in context.

As well as navigating parents and other readers through all this helpful information, Allman has also gathered together some fascinating interviews, with some very notable business people, including Tim Campbell (best known as the first winner of the UK version of The Apprentice), Laura Tenison, founder of Jojo Maman Bébé, and impressively, Nicola Horlick, the entrepreneur behind Bramdean Asset Management, and latterly, Derby St films – all of whom give parents of would-be entrepreneurs some advice on encouraging children down this path. Also featured are interviews with young entrepreneurs, including Adam Bradford, director of UnITe Computing, which he founded at 14, and 22 year old Luke Coussins, founder of VioVet, the online pet food and medication business. These young people explain how they got to where they are now, and give frank assessments of the roles their parents and schools had in their stories to date.

However, my own personal interest in the guide stems from the chapter devoted to young people and money management. Of course, no book about entrepreneurship and business success would be complete without some mention of this subject, but Allman’s approach to it is particularly refreshing. She encourages parents to teach children about money management as they go, and tries to ensure that it comes out through play as much as possible, most pertinently in the ‘double a penny’ game. True financial success often comes through taking control of money, whether by budgeting, or by simply understanding the basics, and this, as we discover, is the basis for success in entrepreneurship.

Youth unemployment: are inflated job titles preventing young people from moving up the career ladder?

Young people in 'creative' sectors are missing out new opportunities and falling behind many in the graduate professions because they do not have the required skills and experience to move onto the next rung of the ladder.

Those who have chosen a more conventional career, such as teaching or accountancy, have a built in career ladder. The first step is training, and on passing exams, they quickly reap the benefits of their qualifications, as they can command a pay rise, take on more responsibility and look meaningfully to the future. Sadly, though, things are not quite so clear cut for those, many of them arts or social science graduates who have chosen to work in the policy, media or communications field. Not only are their starting salaries lower than those on trainee schemes, but they also have a much harder time navigating their way around the industry. Part of the problem is the fact that no two job titles mean the same thing.



Take a look at any jobs website, and it highlights the difficulty young people have in moving to the next rung. For example, one company looking to recruit a policy advisor might want someone fairly experienced, with  specialised knowledge of a particular area, but another company may just be looking for a recent graduate who they can train. Similarly, companies are increasingly referring to unpaid intern positions as 'researcher' roles, partly because of the stigma surrounding hiring young people to work for nothing, but clearly, this sort of research role is very different to that of a skilled post-graduate. It is a real concern that young people are not easily able to find the level they are at, and ascertain what the next stage in their career might be.

Nor can a job seeker work out his professional level by salary expectations: a larger company may offer a higher salary and a better benefits package compared to a smaller company, even though someone at smaller company taking on far more responsibilities. Recently, an administrative role at a FTSE-100 company was posted, which offered £34,000 per annum, whereas a smaller company with limited funds might struggle this match this salary for a part-time director.

The professions have none of this difficulty: a teacher, for instance, knows roughly how much they can expect to earn with x qualification and after y years in the profession. An actuary knows broadly how long it takes to get to a certain professional level, and how they can maximise their chances of getting to this stage. But for the majority of young graduates, they have none of this security, and have little idea how to fulfil their professional potential.

Crowdfunding: a guide for beginners

It is not just individuals who have been affected by the squeeze on credit. Many small businesses are struggling to attract funding from the traditional outlets of banks and building societies, this is preventing them from expanding, servicing debts and making other essential payments, and in some cases, preventing a business idea from getting off the ground at all. 

The good news is, ordinary people can help, and profit in the process, through a new source of lending: 'crowdfunding', also known as peer-to-peer lending or peer-to-business lending, depending on whether you are lending to an individual or a business. A growing number of platforms, which are usually online, are connecting individuals attracted by the promise of higher interest rates with businesses and other individuals who might otherwise struggle to raise capital from traditional lenders.

Undoubtedly, for the lenders, this is riskier than putting your money in a savings account, as these companies are not regulated by the FSA and are therefore not protected by the Financial Services Compensation Scheme, but returns on your investment can be up to 8%, compared with current returns on a typical bank savings account of about 3%. But credit checks are carried out on borrowers, and loans are often spread out across different borrowers, so investment is diversified: peer-to-peer companies are committed to keeping risk of default as low as possible, if only to protect their own reputations.

So let's have a look at some of the key players in this new industry, and what marks them out from their competitors, especially some of the more accessible ones for young people trying to maximise their savings.





Zopa - a peer-to-peer lending platform, and market leader in individual lending, it is widely credited with kickstarting the new wave of alternative lending. Zopa has now brokered over £200 million of loans in its six years of business, and is expected to grow another 50% this year. Offer savers interest rates of 5-8%. 

Ratesetter.com - Zopa's major competitor. Savers can earn up to 4.7% on a fixed-rate bond option. Risk of default is limited, as borrowers must be aged 24 or over, have a good credit history and a regular income.

Funding Circle - this is a peer-to-business broker, since money is lent to small businesses rather than individuals. Average return is currently around 8%, although lenders are charged a 1% annual 'servicing fee'. Investors can either choose the businesses they want to lend to, or 'autobid', whereby their money is spread across a range of companies.

ThinCats - less risk is involved with this peer-to-business lender, as it only offers secured business loans. However, it is perhaps one for those with more disposable income, since the minimum investment available is £1000. Average returns range from 8-11%.

Relendex - this peer-to-peer company aims to provide secured loans for commercial property investors. Each borrower is connected with several lenders, who collectively provide the capital for people looking to earn income on commercial properties. Returns for lenders range from 5% to 12%, and it offers competitive rates for borrowers at higher loans to value.

Squirrl - this peer-to-business company allows would-be investors to bid for investment opportunities in public sector and major listed public companies. Risk is also limited because no saver is allowed to lend more than 5% of the total value of a loan.Returns are from 6-7% on low risk loans and 9-12% for SMEs.

Rebuildingsociety.com - this is another crowd funding platform which connects lenders and borrowers. What sets rebuildingsociety.com apart from other peer-to-peers is that lenders choose how much they want to lend from a series of potential investments and select the interest rate at which they will lend based on the risk levels of the investment. Rebuildingsociety.com also offers 'Trust Points', a reward system which awards users points for doing anything from logging into the system, to making an early repayment on a loan. Profits from the website are then given back to investors and entrepreneurs depending upon how many points they have amassed.




So, the companies we have looked at above all deal with funding, but what if you fancy taking a stake in a company? Here are a few equity options:

Seedrs - this company allows investors to back start-ups from as little as £10, although the real beauty in investing in these companies for many is the tax relief available through the 'Seed Enterprise Investment Scheme' (SEIS): investors can claim back up to 50% of the money they invest.


Crowdcube - like Seedrs, this gives would-be 'angels' a chance to invest in a start-up in exchange for equity in the business. Also like Seedrs, investors are eligible for tax relief - under SEIS and the Enterprise Investment Scheme (EIS). Investors select the company they want to invest in from a series of pitches which are uploaded onto the website.


startups.co.uk - this website offers advice to a range of companies looking to start their own business from scratch. 

Young people and debt: all debt was not created equal

Payday loans are fast becoming the most common loans for young people after student loans. Research by PwC found that 26% of 25-34 have resorted to payday loans from much maligned companies like Wonga and PaydayUK to pay for essential items. Today's uncertain climate, coupled with the 'have-it-now' culture of today's tech savvy youth, is creating the perfect breeding ground for these high interest companies, which can charge up to 4212% APR. This is a very worrying trend: young people who borrow (on average £500) from these companies risk getting trapped in a debt cycle, as they pay more and more interest each month, often without paying off any of the original balance.

Compare this with student loan repayments. The full amount is obviously much greater than that of a payday loan, from 2016, some UK students may have as much as £50,000 of debt, but the way it is paid back is different - and fairer. For loans which were taken out post-1998, but before 2012, interest is applied from the moment students receive their first payment to the moment the loan is paid off in full. However, as well as interest being much lower than a payday loan, students do not have to pay their loan off until they are earning at least £15,000 a year, after which they pay back 9% of whatever they earn per month. So if they earn £15,000 a year, they will have to pay £30 a month. For loans issued from 2012 onwards, the threshold rises to £21,000 a year.

The most important thing to bear in mind with these repayments is that each month they repay, they are actually paying off some of the original amount, so for every subsequent month, slightly less interest is accrued. In other words, with each monthly payment, they are making a tangible difference to their debt. Not so for payday lenders. If borrowers pay off only the minimum amount each month, they are making no dent whatsoever on the overall amount they have borrowed: they are just paying off some of the interest which has been accrued. Hence the reason why so many people quickly become dependent on these companies.

The other unfortunate thing about the distinction between a payday loan and student loan are the differences between the clientele of each. Recent studies have shown that graduates are considerably less likely to borrow from a payday lender than a non-graduate. Reasons for this are not entirely clear, but it may be that non-graduates are more likely to be in a lower earning job than a graduate, or because graduates are reluctant to take on even more debt than they already have and or perhaps because banks are more likely to lend to a graduate who may have a better credit history.

Perhaps then, it is time for payday lenders to look at adopting some of the features of a student loan repayment model. Of course interest will always be higher with a commercial company such as Wonga, but these companies might think about taking a more long-term approach, and making sure that with each repayment a customer's original debt decreases, rather than simply stemming the flow of ever-increasing interest repayments.

Want to learn more about student loan repayments?

Going to university is as much about value for money as it is about education. Many universities now charge as much as £9,000 per year to study, and the need has never been greater for students to get a firm grasp of their finances. So let's have a look at some of the best sources online for finding out about student loans, tuition fees and how much repayments will cost.

Student loans company - http://www.slc.co.uk/

As the official website for student loans, and the company which issues UK loans and financial support, this should be the first port of call for all loan related questions. Most useful are the 'service' and 'students' sections, which give a breakdown of how different types of loans work (from the pre-1998 'Mortgage Style' loans, to the more modern 'Income Contingency' loans), as well as a short guide on interest, why it is payable, at what rate it is payable and how it is calculated. There is also a 'frequently asked questions' section and a guide to repaying loans from abroad.

MoneySavingExpert -http://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes

A reliable source on anything from mortgages to mobile phone contracts, Martin Lewis's website has some comprehensive guides on student finance, focusing on 20 or so must-know facts, including the number of years before a debt is written off, whether student loans are counted as part of your credit rating, to the little-known fact that repayments could be £470/year less than for current graduates - contrary to popular belief.

The Complete University Guide - http://www.thecompleteuniversityguide.co.uk

This is a must-read site for anyone looking at going to university, and advises on everything from university rankings, to crime rates in university cities and clearing. There is also a very useful student loan repayment calculator, which helps you work out exactly how much you can expect to pay back and over how long, based on your projected salary and career path.

HM Revenue and Customs - http://www.hmrc.gov.uk

HMRC's website has a dedicated section on student loan repayments and advises on some of the trickier issues such as which types of student finance are taxable (most grants and awards are not), what to do if you overpay on your student loan and how to get refunded and how to repay your loan if you are self-employed. HMRC's advice is a bit more technical, but very useful for some of the more complex problems you might face when repaying a student loan.

Department for Business, Innovation and Skills (BIS) - http://www.bis.gov.uk

This is the governmental department responsible for economic policy, including consumer affairs, company law and, importantly for students, higher education. BIS has a 'policies' section where it lists guidelines for students heading to university, including a table of financial support based on household income and information for those who have deferred entry from 2011-2012. BIS also mentions a £150 million National Scholarship and answers questions about eligibility for loans and financial support

Student Beans -http://www.studentbeans.com/  

Student Beans is the go-to site for money saving deals specifically targeted at students, but it also gives some advice about student loans. If you can tear yourself away from all the 2-1s and 'up to 80% offs', you'll also find a section on student loans - with some practical tips about repaying, such as whether or not you should think about paying your loan back early or whether you need to worry about penalties for repayment failure (the answer, for the most part, is no).

These are just a few of the websites available for those looking at applying for a student loan, or those who already have one. But it is also worth looking at information given by each individual university, as they may have their own awards and grants available to make your money management during your time at university that little bit easier.