Is It Right To Turn 18 and Suddenly Become Financially Unsupervised?

 by Victoria de Bruijn

Over recent years the global economic state has plummeted with an economic oppression around the corner for many young people; student debts and inflation are at all-time highs, there is an ever-widening class divide and a generation often with little clue about money management. To amplify these economic failures young people are turning to ‘Buy now, Pay later’ schemes - such as Klarna and ClearPay - fearing falling behind on trends.

Founded in 2005, Klarna is a regularly used app for essentially borrowing money; the app allows the user to split their payments into smaller, more manageable installments, however, inexperienced users are often caught off guard by added fees and interest from their chosen repayment method. Options for repayment are to pay in installments, pay in 30 days, pay later by card, or set up a Klarna financing account, however, all of which encourage young people to spend money they do not have. Although you must be 18 to access these schemes, it then suddenly becomes very easy to make purchases due to credit. Ms Walther, a regular user of Klarna, wrote that ‘the only hassle is you have to remember to pay the bill’ highlighting the inviting approach and the mindset of many users. What is not highlighted, nonetheless, is the additional monthly payment on top of other bills, such as rent and utilities. Everybody’s financial future is uncertain, emergencies often arise preventing immediate installment payment - added interest and fees therefore increase the price of purchase in the long run. Forgetting to pay these installments can be detrimental to their credit scores thereby increasing future interest rates, providing fewer loan options. This can make it harder to find housing, acquire certain services and, in some cases, even find a job. Young people are forced into the world of debt before they have even left school.

Understanding debt, savings, cash flow and how to use money wisely are important skills that need to be taught. They can increase our wealth and prevent us from making poor decisions. Increasing wealth creates security, resulting in a better standard of living in addition to a cushion for emergencies. Avoiding financial stress keeps you mentally well and reduces unnecessary purchases, which in turn can even have a positive impact on the environment, through limiting our well-loved ‘throw-away culture’. 

Schools provide limited education to young people depriving them of a healthy approach to money. Many finance books are both overcomplicated and outdated, scaring young people from the necessary education to avoid unnecessary debt. Previous knowledge is often required, limiting the starting points for people aiming to learn more. However, Scott Pape - the ‘Barefoot Investor’ - uses ‘Five Steps to Financial Freedom in Your 20s and 30s’ to equate money to freedom suggesting ways to use money in the most pleasurable fashion. Pape encourages the reader to manage their money to do the things they want - formulating a personal plan rid of societal pressures. This is inherently debt-reducing due to a large number of over-spending spawning from a feeling of insecurity.

Furthermore, Natwest bank offers ‘MoneySense’ for young adults aiming to improve their money management. However, how easy is this to access? Do young people know about it? Do they even think to look for it? Schools should be providing this education or, at the very least, guiding pupils to the relevant information.

To conclude, get prepared, find education, before it is too late. Age does not equate knowledge; it is absurd that 18-year-olds are suddenly encouraged to make life-altering decisions without understanding finance. Although it sounds so obvious, we are never taught to buy things we need as opposed to frivolous purchases. Current generations are becoming increasingly aware and concerned about the future - proven through the climate-change push and more engagement in government politics - yet we are not educated on how to make a difference. It starts with financial education.