Our complex relationship with money: the importance of financial education

Since we couldn’t share a glass of bubbles IRL to celebrate Vivi’s second book, Stay Financially Healthy While You Study, we held a virtual book launch instead. 

Vivi was joined by Clare Seal, the creator of the @myfrugalyear Instagram account and Founder of The Financial Wellbeing Forum. Here’s a summary of their conversation about our complex relationship with money, how finances affect students, and the importance of financial education and literacy. 

When should financial education start?

A lack of financial skills and confidence can be dangerous for young people, particularly as there are many financial risks for students today e.g. multiple credit facilities, buy now pay later (BNPL) services, the ability to leverage investments through an app, etc.

We’ve heard firsthand from students and the universities and colleges we work with that it’s these ‘transition points’ where students can run into real trouble. 

To try and address this, financial education should start as early as possible, then be built on and ‘scaffolded’ as we grow. Getting involved with finances from a young age will help to underpin financial wellbeing throughout life. Ideally, children should know the cost of everyday items – like toilet roll – rather than just seeing them appear in the house. 

This can only be done if open, transparent conversations are encouraged and children are given the confidence to ask questions, especially females – as research does show a gender disparity when it comes to relationships with money.

It’s also important for the education system to focus on developing numeracy and literacy skills as a lack of these can fuel issues with money. But it’s not just the responsibility of schools, colleges and universities; financial wellbeing is a lifelong pursuit and a continuous journey for all of us.

What does financial wellbeing mean?

Financial wellbeing – a relatively new concept – is having the ability to withstand financial curveballs when they come (like Covid-19). On the other hand, it’s also related to ‘opportunity cost’ and being able to take advantage of financial opportunities without compromising your longer-term goals.

The thing about budgeting is if you live your life with a balanced budget of incomings and outgoings, then you’ll never be able to get ‘ahead’ financially e.g. through savings, investments and pensions – think of the saying: “they with the most assets wins”. 

Financial wellbeing is about being able to pursue building these assets, while also not being bound to money worries that affect your sleep, relationships, mental health, etc. Being ‘well’ means being holistically well – physically, mentally and financially. It’s all related – a ‘wellbeing tripod’ if you will.

Employability and financial wellbeing

When you know you’re employable and have valuable skills, life gets a little bit easier because you have some reassurance that if you were to lose one job, you would be able to get another.

Employability, along with a base level of money, is important for feeling ‘financially well’ as it takes the pressure off depending so heavily on a pay cheque or a partner.

Should we be talking about employability (and the earning potential of careers) when students are choosing A-levels and degrees?

It’s another case of the earlier, the better. That said, there’s already so much pressure on teachers to be everything to young people; parents and guardians need to offer support with these decisions too. 

Unfortunately not everyone has the knowledge to do this, which can contribute to inequality – for example, first-in-family students might not have the same parental and guardian support in making these decisions as others. There are clear societal issues that need to be addressed, but it’s hugely beneficial to start these conversations at home where possible.

We know that parents and guardians are the first port of call for the vast majority of students, with 62% of 1,000 students surveyed telling us that they would turn to their parent(s)/guardian(s) for advice and support if they had financial difficulties (followed by friends with 34%).

So how do we empower parents and guardians to help their children to make better decisions about the future?

Passion can’t always pay the bills

Passion is important but you can’t buy a pint of milk with it! We can do young people a disservice by telling them passion is the most important thing, because we have to be able to earn a living and it’s important to focus on this when young. 

Laying down some foundations, like making investments and buying your own home, are great things to try and do as early as possible and a goal for many of us. It’s ok to say that you want to own your own home, travel the world or retire early and there shouldn’t be any stigma around this. Unfortunately though, most passions don’t translate into the income needed to achieve these goals.

It’s important to normalise the fact that it’s fine if you can’t monetise your passion. Not all hobbies can (or need to) become careers. You can also easily lose a passion as soon as you monetise it.

How are money worries affecting students, their wellbeing and mental health?

75% of students surveyed told us that they worry about finances, with 67% of these saying it negatively impacts their mental health. This worry is also affecting students’ optimism about the future, with 32% telling us they regularly feel hopeless. 

Financial worries are clearly having a significant impact on this generation so we have to include money in the conversation about mental health, addressing the ‘whole student’. It makes no sense to talk about anxiety without looking at some of the reasons for it. 

These financial worries experienced by students aren’t going away. It’s the responsibility of a generation to ensure these young people have a future, otherwise there’s no future for those who come after – it’s incumbent on all of us to help in every way we can.

How might returning to ‘campus life’ after the pandemic pose new financial challenges for students?

Students are likely to act similarly to the rest of us and want to enjoy freedom when we have it again by booking holidays, going out to restaurants with friends, etc.  Naturally, freedom will bring financial temptations.

There’s a worry and perhaps a challenge for universities that freedom could come with an undercurrent of panic for some students. Perhaps those who have had a hard time with their finances during Covid-19, as well as those who have managed to build some savings, could overcompensate by not eating as much as they should or participating as much in social university life in order to avoid spending.

There’s also likely to be a bifurcation where while these students are retreating inwards through panic, there will be others – including both those who feel ok about their financial situation and those who feel hopeless, who will blow all their cash on freedom and fun. This will reflect the ‘k-shaped economy recovery’.

Challenges for new students

It’s hard to guess how a new generation of students will cope but some concerns are that:

• They won’t have been in a structured education environment for the last 12-18 months and university is a big, scary transition even with adequate time to prepare (e.g. at school / via open days and applicant visit days).
• Being at home for so long, some in difficult family environments, is likely to have had a toll on mental health for many students.
• New students will have to face the challenges typical of all new students at any time, as well as added issues caused and accelerated by Covid-19.

Universities have done a phenomenal job when it comes to student support throughout the pandemic, but there will undeniably be challenges when students return to campus.

The sector needs to try and prepare students as much as possible, beginning right now, so their finances and mental health start on the right foot. A whole-sector approach of working together is the only way to do this.

The importance of optimism

Also important is conveying a sense of optimism to students. Yes, it’s undeniably been incredibly difficult to be a young person during Covid-19, but talking too much about this can perhaps fuel a sense of hopelessness. 

Focusing on positivity and opportunities can be helpful – the ‘normal’ we had before the pandemic wasn’t perfect. We’re now in a moment of time when we can create change that’s better for the future – environmentally, for instance.

Could receiving student finance payments monthly help to establish good budgeting habits?

There may be a few logistical issues to overcome, but technology should make it achievable to pay student finance payments monthly rather than termly. This would undoubtedly be much better for students’ financial management and wellbeing. 

It would get students into a good habit for receiving a monthly salary once they graduate and would also address the problem of many students getting a lump sum of money, often for the first time in their life, and spending too much too quickly. 

Brands know exactly when the payments are made, purposefully targeting students with discount codes and other incentives to buy at these times. Simply telling students to have better self control in these environments isn’t really helpful or practical.

If these payments can instead be made on a monthly basis, then we’ll be teaching students how to budget and start putting money aside. Also, as talked about in Stay Financially Healthy While You Study, encouraging students to open a separate bank account to pay themselves a monthly salary can be a big help.

Financial education and life skills alongside student payments

Financial education needs to go hand-in-hand with payments, so students are clear that there’s no such thing as ‘get rich quick’ schemes, overdrafts aren’t ‘free money’ and are prepared for how much student life really costs e.g. how much is needed for a deposit to live in private accommodation etc.

Being honest and open in conversations about money is crucial, particularly when it comes to riskier financial decisions like investing or gambling. 

Equipping students with life skills will also contribute to better financial wellbeing. For example, if they know how to cook, they’ll perhaps be less likely to order so many takeaways. These aren’t always ‘financial skills’ as such, but they’ll undoubtedly have an impact on finances.

Can the ‘morality of making money’ cause tension among some young people?

The debate around the ‘morality of making money’ includes:

• Is it ok to make lots of money?
• Does it disadvantage other people?
• Should we consider the impact on the planet and other people when we’re making investment decisions?

Ideally, money should be an amplifier of who you are and what your belief system is.

After all, our decisions dictate how we spend our money, which then affects how others behave and how businesses operate; the best power we have is buying power. A positive thing that’s come out of the pandemic is that more and more people are buying locally to support small businesses. 

Also important is that people always have their own personal choice. We shouldn’t necessarily call another’s choices ‘immoral’ as this is all relative and depends on our own personal morality.

Watch the recording

If you have any questions or comments for Vivi, you can get in touch with her via Twitter or email hello@blackbullion.com.

You can reach Clare via the @myfrugalyear Instagram account.

And don’t forget to check out the book!

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