UK teens have low financial awareness, survey says

By UK CreditCards.com

A new survey has revealed disturbingly low levels of basic personal finance knowledge among Britain's teenagers. Many young people have store cards, often with high interest rates, yet researchers found that many did not know the meaning of "annual percentage rate" (APR) and had very relaxed attitudes towards debt. The findings indicate that much more needs to be done to educate the nation's teens to prevent them from mismanaging their money in the years to come. teens-and-money

Many unclear on APRs despite owning store cards
Seven out of 10 young people between the ages of 16 and 18 do not understand the term "APR," according to new research commissioned by the Chartered Insurance Institute (CII). The survey of 454 full-time students, which was conducted by Opinium Research on behalf of the CII, also revealed that 33% of respondents did not understand the term "credit," while 24% were ignorant about the word "debit."

This lack of knowledge is disturbing because 95% of survey participants owned a debit card, and 19% possessed a store credit card. As store card providers use the APR to calculate the interest they charge on a card's outstanding balance, the findings suggest that many students do not understand how their cards work -- and how much debt they are accumulating

Debt regarded as the norm
Most students surveyed have a relaxed attitude towards credit card and personal loan debts, according to the survey. Half of respondents described debt as "something everyone goes through at some point." Just 2% of the young people surveyed saw debt as "unusual." One-third of youngsters also considered credit to be "useful."

Financial teaching found to be lacking
The CII's research also found evidence of poor or non-existent financial education in schools. Two-fifths of the students who took part in the survey claimed not to have received any kind of finance lessons at school. Even among those who had received classes, many said their teachers had not discussed simple money management or concepts such as mortgages, pensions or insurance. A separate survey of 258 secondary school teachers, also conducted by Opinium Research, revealed that 45% had too little time and too few resources to teach the subject.

Such findings are troubling, considering the age of the teens surveyed -- they will soon be striking out on their own, armed with very thin financial knowledge.

"Our research showed that even those teens who are learning some form of financial education could use additional support, as many basic financial concepts seemed out of their grasp," said David Thomson, a spokesman for the CII. "It's crucial for this age group to have a good understanding of personal finance as many of them will set off for university and have to budget for themselves for the first time."

See related: The 10 credit card commandments for students; Study: debt boosts young people's self esteem

Published: 8 February 2012