Investing in the financial education of vulnerable young people has a dramatic effect on their financial wellbeing, new research has found.
Every £1 spent on financial education for vulnerable young people created £5.57 in social value, which grew as time went on, the research by economic research consultancy ERS on behalf of the Money Advice Service (MAS) found.
ERS spent a year examining the impact of ‘survival’ money management workshops on over 1,200 16-25 year-olds not in education, employment or training' (Neets) and care leavers, who on average are more likely to be in poverty and have problem debt.
It found that those in the programme saw their debts drop by 60% compared to control groups of their peers, who saw their average debts go up by 50%.
The number saving money regularly also increased from 48% to 71%, well above the national average of 60%.
The number of young people in the study who would seek specialist advice from charities such as StepChange or Citizens Advice also went up from 32% to 50%.
Sarah Porretta, UK financial capability director at the Money Advice Service, says that by providing care leavers with the awareness and confidence to seek advice, the programme has helped them become more independent.
She says: “The findings from this programme will undoubtedly inform the practice and delivery of young people’s financial education.”
Problem debt growing fastest amongst youngsters
According to the National Audit Office (NAO), problem debt costs the taxpayer £248 million a year, and society more widely £900 million annually.
Those aged 18 to 24 have average unsecured debts of £1,460 and are the UK's fastest growing group of debtors according to the Financial Conduct Authority (FCA).
The study suggests that the £156 million cost of providing the UK’s 800,000 Neets and 10,000 annual care leavers with financial education could create a social value worth six times that at nearly £900 million - by reducing debts, increasing savings and alleviating financial burdens.
The workshop was part of a programme by MyBnK, a charity that delivers financial education programmes to seven to 25 year-olds in UK schools and youth organisations.
MyBnk’s Money Works course covers independent living, digital finance skills and debt prioritisation. It tackles topics such as budgeting and habits, the financial system, how taxes, banking and benefits work, and accommodation and borrowing.
Guy Rigden, chief executive of MyBnk, says: “Working with vulnerable young people at these transitional periods is crucial. That’s when they are at the highest risk of making the poor financial decisions that can have lifelong consequences. Social and key workers are under immense time and resource pressures to meet the need.”
He adds: “These results, show investing in young people and the use of expert-led direct delivery of these specialist areas pays back for everyone. The improvements against the national averages proves Money Works doesn’t just level the playing field for vulnerable young people, it can elevate it for all.”