By Russell Winnard, Director of Programmes and Services at national charity Young Enterprise.
Over the past decade, technology has shifted our everyday behaviours and habits beyond recognition.
From the way we shop, hail taxis and watch television, technological innovations have made our lives easier and more efficient. At the heart of the digital revolution is the fundamental shift in the way we pay. The boom of online payments and contactless cards has moved us one step closer to a cashless society – and made it easier than ever to spend our money. In fact, the BBC recently reported that half of all debit card payments are now contactless, showing how popular ‘tap and go’ payments have become.
Financial technology has streamlined our lives. But does it help develop an individual’s financial capability, or just make it easier for them to spend?
Generation Z are now growing up seeing transactions as taps of debit cards and clicks on websites. They rarely see money changing hands. Are they going to understand the cold hard reality of financial transactions without ever seeing them in cash? Technology and fintech apps are undoubtedly making transactions easier. But in the process, they are potentially making it harder to stop and think about the financial choices we are making.
We have all committed the online sin of ticking the box promising we have read the terms and conditions when we know we have not. But as more of our transactions take place online, can we afford to take such a cavalier approach to our finances?
When the cost of subscriptions can amount to hundreds or thousands of pounds, we risk sending our children the wrong message: that online transactions are less consequential than the ones we make in ‘real life’.
When you agree to terms and conditions, you are not only making a financial commitment – but a legal one too. Failing to pay for a subscription or membership is not a problem that will disappear by cancelling a direct debit.
As technology makes it easier to spend, we need to make it easier for young people to get a good financial education. Otherwise, we risk creating bad habits and behaviours that will follow them through life – and make them vulnerable to fraud and financial difficulty.
Many young people simply do not realise that the financial behaviours they form in childhood will impact them later in life. The financial commitments they make – from gym memberships to Netflix subscriptions – shape your credit history, no matter how small and inconsequential they seem at the time. Most people don’t check their credit scores until they are 39 years old. This means that irresponsible financial behaviour in your 20s can impact your ability to secure credit in later life.
We are already seeing the consequences. The number of 18 to 25-year-olds declaring bankruptcy has jumped tenfold in three years, according to accountancy firm RSM, with the demographic making up 6.5% of all personal insolvencies.
Finance today is less tangible than ever. You can now apply for credit cards, loans and buy-now-pay-later credit online in an instant. Debt seems less tangible when it exists purely as a minus number on your screen, yet many young people are learning the hard way that it has very real consequences.
An equally dangerous issue with the rise of financial technology is fraud. Earlier this year, Action Fraud found more than £190,000 a day is lost in the UK by victims of cyber-crime – a rise in 24% from the year before.
By moving more and more of our banking online, we benefit hugely from accessibility and functionality, however must also be aware of the increased risk we expose ourselves to. We teach our children to look after their possessions in real life – yet they often hand over their card details and personal information to websites with minimal consideration.
It would be easy to blame technology alone for rising financial fraud. The truth is: if we were better equipped to identify fraudulent signs, we could help young people avoid the traps in front of them.
Educators, parents, business leaders and policy makers all have a responsibility to ensure the next generation is better prepared to cope with these issues.. Considering the central role money and finance plays in our lives, it is astounding that only two in five young people say they have had some financial education in school, according to the latest Financial Capability Survey conducted by the Money and Pensions Service.
The fact that we ignore this vital aspect of life during the majority of a young person’s education needs to change. We must offer children the chance to learn how to save, budget, make choices between financial products, evaluate risk, avoid fraud and to see past misleading financial information. When a child can open a bank account at 7 years old, not teaching children about these dangers is actively harmful and irresponsible.
The rise of technology has forever changed the way we engage with money. We need to make early interventions to encourage young people to start good habits early.
In this technologically advanced world, young people need financial education to keep them safe and on the right path. That education has to take place in our schools and universities – but it also takes place in the home. That’s why we need educators,parents and policy makers to work together to ensure that Generation Z develop the appropriate knowledge, skills and attitudes to make infromed financial choices within the technological world in which we all now live.