TEACHING CHILDREN ABOUT MONEY AND DEBT MANAGEMENT

Everybody is keen to teach youngsters about debt, but unfortunately it tends to teach them how to get into debt, rather than manage it. Most banks will offer students accounts that include credit cards; you are also likely to be offered an account with a credit card when you gain your first employment. However the main culprits when it comes to encouraging debts are the government. Now a day's anyone going to university would consider themselves lucky to come out of university with debts of less £12,000. Experts agree that this debt is likely to rise to around £20,000 in the next 5-6 years. Although the repayment terms tend to be fairly relaxed, no repayments until you reach a certain salary and very low interest rates, it still means that you are saddled with a significant debt when you enter the world of employment.

Many courses at university last longer than your average 3 year degree, if for example you were training to be a vet, doctor or dentist, degree course will last for 6 years ergo doubling your debt to the government to the tune of £40,000. The government is aiming to put 55% of school leavers through the university, so debt becomes a way of life for the bulk of school leavers. Couple this with the fact that many people want to get onto the property ladder thus increasing their debt significantly.

In the last few years the average age of the first time buyer has risen from 26 to 31 and is expected to rise to 40 in the next few years. The banks and building societies are trying to respond to this by offering various schemes to enable people to get on to the property ladder; they will offer much higher multiples of salary. This is being lent against anticipation of higher salaries; they are also allowing people to borrow 110% mortgages this obviously equates to more debt.

If you couple that with fact that SERPS pensions are likely to be worthless  when this generation reach retirement age, so on top of student debt and possible mortgage, you are also encouraged to pay into a private pension scheme to safeguard their future.

The best time to learn about debt and money management is as a child, children today are financially more affluent than ever before. Research by the Royal Bank of Scotland in 2006 suggests that 16 yr olds earned a total of £713 million on top of £258 million in pocket money. It also suggests that 55% of teenagers have little or no idea of what they are spending and also 45% of them have no idea of the difference between a credit card and a debit card.