News & Views - Savantor

Youth is key to acquiring financial self-management skills

Wednesday, 09 July 2014
The FCA is proposing to introduce caps on pay day loan charges in an attempt to protect people who have turned to this form of loan from being exploited in terms of extortionate rates and charges. There is no doubt that these loans can prove to be a slippery route to exit once taken, and there are many horror stories of people’s lives being taken over by a continuously growing debt that they find themselves unable to manage. Whilst there are various sources of help available for those finding themselves in this position, a key issue must be how to educate consumers to understand fully the implications of taking out such a loan before they do so. Leaving aside the social factors of why people take one of these loan products, the question is how to provide youngsters with the necessary knowledge and practical experience to equip them with financial management skills for later life and help prevent them from finding themselves in a unmanageable situation of spiralling debt. It has recently been reported that a UK start-up called Osper is intending to issue children as young as eight with debit cards. Whilst on the face of it this may be regarded as surprising and potentially risky, it can also be viewed as an opportunity to allow children early practical experience of managing money within an infrastructure of parental control. As well as a prepaid debit card, the Osper service provides a mobile app with separate logins for the young people and their parents, so a parent can put more money on the card and monitor how much is being spent. The Osper card is by no means the only children’s financial product in the market - there are other products available from card issuers and mainstream banks including savings and current accounts, debit and prepaid cards. Nevertheless there is a gap between children who can be exposed to and benefit from the experience of these types of products, which require some extent of parental involvement, to those who do not benefit from the parental infrastructure to be able to obtain and use these products. The issue to resolve therefore must be how to help these youngsters to become more financially astute and understand the implications of credit and debt and that there is no such thing as ‘free money’.
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