Young adults and money management
Last night saw the launch of our latest research (in collaboration with the Money Advice Service and Financial Times) exploring how young adults manage their money as they transition from education to employment. We know that this is a critical period of change for many young adults. Leaving education and getting a job can bring the first tastes of financial freedom and with it, responsibility.
We set out to understand who young adults do manage their money at this point in their lives, and how they could be supported to do it better. Through four qualitative workshops and a quantitative survey, we spoke to 500 young adults aged 16-25 to delve deeper into their worlds. Here are the five most important things we learnt:
1. Managing money is important to young adults, but many feel ill-equipped to do it well
More than half of young adults (55%) ranked managing their money well within their top three priorities in life right now, on par with getting a good education or training (55%). It was clear that young people knew money management is important. However, when push came to shove, socialising seemed to matter more. When young people felt that managing their money well would mean compromising on their fun - for example, putting money into savings instead of spending it on a night out - fun came first.
2. Young adults are taking some steps to manage their money, but these are often reactive or short-lived
Four in five young adults in our quantitative survey reported checking their bank statements in the last 12 months or checking their current account balance. However, in the workshops it was clear that many of these actions were reactive, taken when they were dipping into their overdraft or nearing their next pay check. Few have pro-active, long-term approaches in place.
3. Removing demands on willpower is seen to be a key strategy
In our quantitative survey, three quarters of young adults (72%) agreed that self-control is more important than knowledge when it comes to managing their money and this was reflected in their preferred money management strategies. Many young adults looked to place barriers between themselves and their money to remove the temptation of spending. We heard a number of stories from young adults about giving money to their nan, aunt, or other family members as a means of doing this.
4. There is notable appetite for more information about money management
The vast majority of young adults (85%) felt they had not been taught enough about money management at school. That means more than four in five young people are leaving the education system feeling unprepared in this regard. When asked what topics in particular they would like to know about, credit and managing investments were the key areas. Knowing how to engage with credit safely and responsibly was a particular focus point for young adults.
5. Tips for young adults should be achievable, informative and supportive
From young adults’ feedback, we derived some key principles to bear in mind when communicating with young adults on this topic. They wanted achievable targets to work towards rather than large financial sums to aim at. They also wanted pieces of advice with sufficient information that they could actually act upon. Anything too short, too snappy, or lacking a call to action was often derided as vague and empty of meaning.
Reflecting on the findings, Peter Pledger of the Financial Capability Advisory Board and one of our panellists for the evening pointed out that there is an excellent range of initiatives providing financial education, and it has never been a more positive time in that regard. But as the statistics show, there is still a long way to go to ensure every young adult is financially competent. We hope that this research will provide a valuable resource for those supporting young adults in their transition to adulthood and financial independence.
You can access the full report below and view the video summary via our website.
The research also featured in last weekend’s FT Money section.
If you have any further questions about this research or would like to discuss further, please contact:
Young Adults And Money Management Final PDF
Young Adults And Money Management Presentation Final PDF