Today's school leavers have better money skills than older generations, a study has found.
Research from credit report and score provider Noodle revealed 16-year-olds have higher levels of financial literacy than 19 to 39-year-olds - suggesting financial education in English secondary schools is having a positive impact.
Noodle tested more than 1,000 people in England on their personal finance skills with a mock GSCE financial literacy exam to gauge people's understanding of key financial principles, as well as test their grasp of basic maths.
Questions included calculating the best interest rates, analysing the impact of inflation, understanding the difference between good and bad debt and picking the right multi-buy deal in a supermarket.
The experiment compared recent secondary school leavers with older generations and found 42 per cent of 16-year olds achieved A grades, compared with just 36 per cent of millennials who achieved the same grade.
The teenagers also achieved better average scores, gaining 5.8 marks out of 10 verses millennials, who got 5.3 marks out of 10.
Jacqueline Dewey, managing director for Noddle, spoke about the positive impact of the government's move to make financial education a compulsory element of the National Curriculum in England from 2014.
She said: "It is really encouraging to see that 16-year olds performed well in the mock GCSE exam; four years after the government introduced the mandatory requirement for financial education.
"It proves that younger generations are likely to be well equipped to make good financial decisions, which will help them later in life when it comes to managing their money and using credit – like loans and mortgages – responsibly.
"Although the study suggests that financial education is having a positive impact on younger generations' prospects, it has highlighted an area of concern.
"Namely that there are many adults – primarily millennials – who have not benefitted from financial education in secondary school and, as a result, have lower levels of financial literacy."
The results have been welcomed by the IFA community.
Scott Gallacher, chartered financial planner at Leicester-based Rowley Turton, said: "This appears to be excellent news as the level of financial literacy in the UK has been a concern for some time.
"Financial education won't solve the advice gap problem but it will enable some people to make better financial decisions and that is clearly to be welcomed."
Martin Bamford, managing director for Surrey-based Informed Choice, said: "The findings in this research sound really positive. There has been a real absence of personal finance education in schools for too long.
"Schools can play an important role in equipping young adults for money matters in the real world, but parents must also take responsibility and include their children in aspects of household budgeting.
"Leaving school with basic personal finance knowledge will allow young adults to make better decisions as they enter the workforce and get bombarded with advertising for credit.
"Making better financial decisions in your 20s is likely to put you in a stronger financial position as you buy your first home, start a family and save for retirement. It should also create opportunities for advisers who are better able to engage with financially literate clients."
The analysis also found that Baby Boomers, or those aged 50 to 65, also performed very well on the mock exam.
On average, they scored a B grade, but they also had the highest number of people who achieved an A or above at around 59 per cent.
Interestingly, only 16 per cent of Baby Boomers said that their education prepared them to make the right money choices in adulthood, which suggests that it is not just education but also experience that plays an important role in financial literacy too.
aamina.zafar@ft.com
