How did you learn about managing cashflow, using credit cards and applying for loans?
Through trial and error? By taking advice from friends and family? Or were you lucky enough to have lessons about personal finance at school?
If you had been active on social media when you were young, perhaps you would have turned to influencers for financial guidance. Many young people today do, and unfortunately get their fingers very badly burnt.
We all saw the effect of Reddit users being urged to dabble in GameStop shares – many young people bought shares when they were at a high and then saw the value of their shares crash – but that is just the tip of the iceberg.
If you believe what you read on social media, you can ‘get rich quick’ – but these so-called financial influencers are not trained, or dare we say, qualified to give advice.
Often, they are sponsored to promote financial products and investments but have no financial experience and knowledge to back up the advice they are giving. It seems the only people getting rich quick from their advice is them, and perhaps a few lucky followers.
For many, these are desperate times. Covid-19 has impacted family finances and job prospects for thousands around the country, particularly young people, so an easy money message is a very tempting one.
We produce the Young Persons' Money Index every year to understand young people’s knowledge and attitudes to finance. The research also helps us to track the take-up of financial education in schools since it was first introduced onto the national curriculum in September 2014.
Of the young people we surveyed for our 2020-21 survey, 67 per cent reported that they regularly worry about their personal finances. Covid-19 has not improved that picture, with 59 per cent saying the pandemic has made them more anxious about money.
Most young people still seem to learn about managing money from their families, despite there being, in theory, a requirement to teach financial education in schools. In fact, a significant number (75 per cent) say most of their financial understanding and knowledge comes from their parents. That figure rises to 88 per cent if you include those who say they are self-taught.
And the self-taught figure is likely to be increasing, what with the worrying trend for young people to turn to uneducated social media influencers for their financial advice.
Financial websites and influencers can be very useful sources of information. There are some qualified and very knowledgeable financial influencers out there (Martin Lewis, Claer Barrett and Faisal Islam to name a few) and some very useful official consumer websites, such as those provided by the Money and Pensions Service, Financial Conduct Authority and others.
But apps such as TikTok are full of individuals giving advice on anything from investing in Bitcoin, cryptocurrencies and shares. This proliferation of influencers is exposing young people to bad advice that risks them losing their hard-earned cash, and even to outright scams and fraud.