Financial education, and how to stop student loans from slipping through their fingers

As secondary schools begin teaching financial education as part of the national curriculum for the first time, there’s a timely reminder why learning how to manage money is so important.

A new survey among students, commissioned by insurance company Aviva, suggests that almost half of them spend all or most of their student loan on luxuries.  Three out of five said they had run out of money before the end of term; the same proportion began spending as soon as the loan hit their bank accounts. 

Student loans are supposed to cover priority expenditure – rent, food, living costs.  Instead, the sudden influx of cash often funds nights out, gadgets and holidays.   Some (one in twenty) have spent their entire loan within a few days.

Brian Souter, Debt Advice Foundation’s education manager, commented: “It is still very common for young people to get through their entire school career without being taught anything about managing their money. 

“Many parents, particularly those with money difficulties, try to shield their children from financial matters rather than helping them to understand how a household budget works.

“This can leave young people struggling to know how to go about managing their money when they receive their student loan.”

Learning about money should start at primary school he said, when children first encounter spending. 

“Core lessons about financial responsibility cannot be taught too early.  We have found that nine-year-olds respond extremely well to our lessons, which have been developed by secondary school pupils and which focus on young people’s own experiences of managing money.

“Most families don’t think about their finances in terms of a proper budget, setting out their income and their priority bills, putting aside money for emergencies and savings, then seeing what they have left for discretionary spending. 

“If their parents don’t demonstrate how to organise their finances, and they do not learn it in school, how can young people be expected to handle their student loans confidently and sensibly?”

Debt Advice Foundation’s education programme, DebtAware, runs peer-to-peer money management lessons in which secondary school students teach primary children to understand the difference between wants and needs, the benefits of saving and the need to take a responsible approach to spending.  A new DebtAware website is coming soon. 

For more information on Aviva’s research, click here