Money Matters

10 things every student should understand before leaving secondary school.

When young people leave secondary school, they are equipped with the knowledge, skills and qualifications to transition into further education and enter the world of work. But, are they prepared for the financial decisions that come with adult life?

Despite financial education being a compulsory component of citizenship within the national curriculum for all 11 to 16-year-olds since 2014, last autumn’s independent curriculum and assessment review revealed that content ‘is not always taught, with only a third of children able to recall learning about money in school and finding it useful’. While there are plans to introduce some of the recommendations made in the review, how successful the implementation will be remains to be seen. However, one thing is certain, meaningful financial education cannot be left to chance.

Before young people hang up their blazers, the vast majority will already be making important choices when it comes to spending, saving and borrowing. Yet, without the financial literacy required to make these decisions, it can feel like being given the keys to a car without being taught how to drive – unfair, risky and potentially very costly.

Money has changed too. 20 years ago, many young people would accompany their parents to a bank to pay in or withdraw cash, watch them sign for a purchase or even write a cheque for the weekly shop. Today, the financial world is increasingly digital. More than 6,500 bank branches have closed in the UK since 2015, while digital wallets have transformed transactions and ‘buy-now-pay-later’ has made borrowing money as easy as, quite literally, clicking a button.

So, what do young people really need to know before taking responsibility for their own money? In this feature, Educate explores the 10 things every student should understand to help navigate life beyond the school gates and make confident financial decisions.

Choosing and using the right bank account

There are so many different types of bank accounts available, from standard current accounts to reward, packaged and student accounts, not to mention saving accounts. Choosing the right one is important, but there is no one-size-fits-all approach.

Just as everyone’s financial situation is different, people have different preferences when it comes to the type of account they want and need. The right account should suit day-to-day spending habits, financial goals and current circumstances.

It is worth considering things such as whether there are fees for using cash machines, the cost of arranged and unarranged overdrafts, and if any ‘perks’ or rewards are genuinely worth it.

Comparison websites such as Uswitch, Compare The Market and MoneySuperMarket can be a useful starting point for exploring different accounts.

Managing money digitally

Contactless card payments and digital wallets have transformed spending habits. With a simple tap or double-click, it is now possible to pay for almost anything in seconds, making it easier than ever to spend without really noticing how quickly it all adds up, particularly when the money feels ‘invisible’.

Regularly checking banking apps and account statements can help young people understand where their money is going, spot unnecessary spending and avoid unexpected overdraft charges.

Student finances and loans

For young people heading into further or higher education, student finance can feel complicated at first. There are two typical types of loans – a tuition fee loan and a maintenance loan. Tuition fee loans are paid directly to universities or colleges to contribute towards course costs, while maintenance loans are paid into students’ bank accounts to help pay for living costs.

They are still loans though, and interest is charged from the day they are taken out. However, repayments only begin once the young person is earning a specified amount. These repayments are taken directly from salaries alongside deductions such as tax, national insurance and pension contributions.

Credit, borrowing and ‘buy-now-pay-later’

Credit cards, borrowing and ‘buy-now-pay-later’ can all be useful when managed responsibly, but they are not ‘free’ money. Before borrowing, young people should be aware of how they work, what they cost, and the risks associated if payments are missed.

While credit cards and traditional forms of borrowing have been around for decades, ‘buy-now-pay-later’ services such as Klarna and Clearpay have become increasingly common, allowing people to buy something immediately and spread the cost over future payments, often interest-free. However, missed payments can result in fees and, depending on the type of agreement, may even affect credit scores. The fact that something can be paid for later, does not necessarily mean it can be afforded.

Scams and online financial safety

It is not just banking that has moved online, almost every aspect of everyday life has. While this has made people more connected, informed, and efficient, it has also created more opportunities for scammers. The advances being made in online technology mean scams have become more sophisticated and much harder to spot.

There are some simple rules that can help stay one step ahead of scammers:

• Keep passwords and banking details private.
• Do not click on unexpected links or attachments.
• If someone claiming to be the bank calls unexpectedly, hang up and contact the bank using a trusted number.
• If something feels suspicious or too good to be true, stop and check.

Financial advice in the digital age

Living in a digital-first era, there is a wealth of information available at young people’s fingertips, including financial advice. However, it can be difficult to know who, or what, to trust.

The rise of ‘finfluencers’, or financial influencers, has brought advice onto platforms such as Instagram, TikTok and Reddit. Some genuinely want to share knowledge gained through experience, whilst others may be doing so to promote products, earn money through affiliate links or build a personal brand.

This does not mean to say it is poor advice, but it is always worth asking:

• Where is the advice coming from?
• What is the advice based on?
• Is the advice right for the young person receiving it?

If in doubt, verify, fact-check and cross-reference before making a decision.

Earning money

Opening a first official payslip is such a memorable moment in anyone’s life. It can be tempting to look straight at the number which is the biggest and the boldest at the bottom of the page, but there is more to a payslip than the final figure. Understanding it can reveal some important, and sometimes eye-opening, information.

There is a difference between ‘gross pay’ and ‘net’ or ‘take-home pay’. ‘Gross pay’ is the total amount of money earned, whereas ‘net pay’ is the money literally ‘taken home’ after deductions have been made.

Young people should also pay attention to workplace pensions. Employers will usually automatically enrol employees into a pension scheme, with both the employee and the employer contributing. A pension may feel like a long way off, but it is essentially like a savings pot and is a way of putting money aside for later life.

Budgeting and independence

Budgeting is not about being restrictive, it is about being informed and in control. Before financial pressures increase with things like rent or mortgages, energy bills, insurance, food and everyday spending, it’s helpful to build healthy habits.

Knowing what money is coming in, what needs to go out and what is left over makes managing money so much easier. Lots of banking apps now come with budgeting tools included, but there are plenty of other options too, such as apps or online templates. The main thing is finding a method that works and regularly checking in.

Saving and planning ahead

Just like with budgeting, creating saving habits sooner rather than later can pay dividends in the future. There are many reasons why people save, from smaller purchases and treats to larger goals such as buying a car or putting down a deposit on a house.

But saving is not only about the things someone wants to buy. It is equally valuable to set aside money for an ‘emergency fund’ in the event an unexpected bill needs to be paid. By doing this, it can help cover the sudden expense while ensuring all other financial commitments can still be met.

Making financial decisions

Making financial decisions is personal and should be made away from any pressure. Financial choices are often influenced by emotions as well as logic.

Social media can make this particularly difficult. When it feels like everyone is sharing their lifestyle online, it can be easy to compare spending and feel pressure to keep up. However, social media rarely shows the full financial picture.

Taking a step back before making purchases in moments like this can help prevent decisions that may be regretted later down the line.

By developing confidence and independence in managing their own money, school leavers will be empowered to make decisions that work for them now, while helping them build towards the future.