400 kids have taken out a payday loan
Some 433 children aged 12 to 18 have been able to take out a payday loan and 402 a store card, according to Action for Children.
The charity found 13% of 12 to 18-year-olds have borrowed money from a high street lender other than a bank or building society.
Young people are resorting to borrowing money in order to buy household goods or buy items to keep up with their friends, reported Action for Children.
It is particularly worried about teenagers taking out loans in the run-up to Christmas.
Some 42% of its frontline staff know young people aged 16 to 25 who are accessing high-interest credit, which it says equates to around 3,500 vulnerable young people.
A lack of financial education is exacerbating the problem, the charity warned. While personal finance education was introduced to the National Curriculum in September, the charity found that 55% of children had not, or didn't know if they had, received any financial education during their time in school.
Some 27% of Action for Children mangers feel their service users are taking out high-interest products because they simply have no idea about how much it will actually cost and are unaware about the hidden costs.
Easy to access
Sir Tony Hawkhead, chief executive of Action for Children, said: "High-interest products and companies are now far too easy for young people to access.
"Some young people are less likely to have the financial skills they need, they may have to live on a low income or are not in education. They are also not able to learn about money at home or at school where other young people do. Add in baffling financial jargon and a lack of knowledge will dramatically create a vicious circle of debt, increasing the risk of mental health problems and unemployment.
"We cannot afford to let children pay this price because of a simple lack of financial education. They must be equipped with the necessary skills to make informed money decisions to give them a chance of a happy future."
Commenting on the charity's findings regarding payday loans, Russell Hamblin-Boone, chief executive of payday lending trade body the Consumer Finance Association, said: “We take these allegations very seriously because providing credit to people under 18 years of age would be a criminal activity. CFA members have robust verification systems in place using credit reference agencies which check, for example, bank details, employment status and electoral roll entries. So while we will be analysing the detail of the poll, it appears that some false results were registered.”
At Moneywise, we firmly believe teaching young people about money is of vital importance. That's why we've teamed up with Gocompare.com to find the Moneywise Personal Finance Teacher of the Year 2015. The winning teacher's school with win £5,000 of equipment. The competition is open for entry from 1 January 2015 but is open for registration now at moneywise.co.uk/personalfinanceteacher. Full details can be found on the website.
Short-term cash loans designed to be borrowed mid-way through the month to tide the borrower over until they next get paid, whereupon the loan is settled. Generally used by people with bad credit ratings and/or no access to short-term credit such as an overdraft or credit card. Like logbook loans, this type of borrowing is hugely expensive: the average APR on payday loans is well over 1,000% and in some instances can be considerably more.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.