According to research from by the OU's True Potential Centre for the Public Understanding of Finance (PUFin) a staggering one in seven 18 year olds is already in debt. Almost two-thirds (60%) of them admit they owe money to payday loan companies - £168 each on average.
Excluding more traditional student borrowing, the research found that these 18 year olds have already racked up debts on credit cards (60%) totalling £14.5 million, as well as unauthorised overdrafts (57%), store cards (49%) and catalogues (49%).
Almost two-thirds (64%) of this age group believe their debt situation could have been avoided if they’d received more effective personal finance education and 94% say it would have been prevented with some form of guidance or support.
In light of these findings, the OU's PUFin director, Martin Upton, gives his top tips to help teens get to grips with their finances.
11 things teens can do today to help their finances
1. Compare bank accounts
Take time to choose the best bank account and savings account for you. There are great deals around on bank current accounts in particular. And be ready to switch and upgrade your bank account – banks offer good deals for new customers.
2. Understand that not all debt is bad
Learn the pros and cons of credit cards. Martin Lewis helps with some great guidance in the course.
3. Know your rights
It's important to know your employment rights and the minimum you should be paid when you start work - even if it is just a part-time job.
4. And know how tax works too
That way you can check if you’re getting paid the right amount. We use a great animation to help here.
5. Be a savvy shopper
Shop around for the best deals (comparison sites can help, to a degree). Be prepared to haggle and always be prepared to switch suppliers. If you a consistently loyal customer the odds are that you are consistently getting a raw deal.
6. Learn how to budget
Start learning how to run a budget - start when you are at home. This will help when you leave home and your budget become more complicated with the increase in your financial responsibilities (for example, for rent and utility bills).
7. Keep safe online
Stay safe when transacting online - particularly when doing financial transactions.
8. Borrow wisely
This means borrowing from the right lenders, with the right product and for the right things. The course shows you how to do this and how to distinguish between good and bad borrowing.
9. Understand how different loans work
Make sure you understand the difference between student loans for college and uni study and conventional loans. You’ll only have to repay student loans if you earn enough money when you start work.
10. Learn what credit ratings mean
Get to understand your credit rating and what this rating affects - and find out what to do to keep a good rating.
11. Start saving early
Remember it’s never too early to start planning for a pension or other income in later life. Don’t end up like so many do in leaving it too late to build up a sufficient pot of money for retirement.
FREE course - Managing my money for young adults
If you want to learn more, the OU's FREE course Managing my money for young adults could help. It takes just 24 hours to complete and contains video content featuring MoneySavingExpert’s Martin Lewis and University Challenge star Bobby Seagull. The course covers a variety of different topics vital for young people looking to manage their personal finances better, including:
- Earning money and understanding tax
- Savvy shopping and budgeting
- Preparing for life after school
- Living in shared households
- Understanding debt and how to borrow wisely
- Credit ratings and how to protecting them
- Planning for later life such as buying a home and pensions
To sign up or find out more, please visit Managing my money for young adults on Openlearn - the OU's home of free learning.