In yesterday’s blog, I looked at the problems young people face when saving for a pension. Today, I’m going to look at the solutions.
A fundamental shift in thinking and behaviour is needed. A previous report by MRM: “Young Money” found that young people were more likely to understand a foreign language than to understand basic financial terms. The inclusion of financial education on the national curriculum should help, but what should be its focus?
At its most basic, financial education should explain jargon. Young people who understand these terms will feel empowered and confident dealing with financial matters. The industry, too, must keep language simple when talking to the mass market.
I also think a good financial education would teach young people about the facts and figures involved, and make these meaningful. As I was saying earlier, we find it easier to save towards something, such as a wedding. If we had a rough idea of how much is needed in retirement, this would give us something to work towards.
Longer term, financial education needs to help change attitudes. I was pleased to note that in one of the schemes for financial education lessons, each child is to be given £20 to invest. They will not be able to touch this money for one year, after which they will be able to see how much it has grown. It is through schemes such as this that young people see money in action.
But there’s no getting away from the fact that saving into a pension means locking away lots of money for up to 40 years. At the same time, we might be building up debt in other areas. This seems pretty unnecessary when you think that we might have all this money sitting there in a pension which we can’t access.
If young people like myself have to fend for ourselves with savings, we should at least have a say in where our money goes, even if this means changing the pensions model fundamentally. We should be able to save and access money when we need it.
It might be time to think about whether pensions serve the needs of young people today.
In my view, the industry is at a bit of a crossroads, but it also has a real opportunity to grasp the mettle and create a saving culture for younger people today.
MRM will be holding an event today with the Chartered Institute for Securities and Investments, which explores young people’s attitudes to money.
Join us at the National Audit Office, 157-197 Buckingham Palace Road, Victoria, London, SW1W 9SP (For directions, click here
The event will also be webcast live for those unable to join. Tune in from 11:15am https://event.webcasts.com/starthere.jsp?ei=1047329