How to talk to young people about money

It’s that time of year when many young adults are preparing to start university. Trips to Ikea don’t come cheap these days, and living away from home for the first time comes with significant financial responsibilities.

Have you had a conversation with your child about independently managing their finances? If not, now is the time to talk budgeting and saving, and trying not to fritter away their student loan on the latest tech or trainers!

On the right track for a healthy financial future

Every parent has a responsibility to educate their children about good financial management, to inspire good judgement and help young people make sound financial decisions. But that doesn’t mean it’s an easy conversation, especially if you were raised to believe that money is a taboo or vulgar subject.

If money isn’t something you feel comfortable discussing with your children, we’ve put together some tips to build your confidence and help you start the conversation. Our guidance is valid for all young adults, whether they are starting university, their first job, or saving for a big purchase, such as a car.

Financial education is improving

Thanks to Consumer Finance Expert Martin Lewis, financial education in schools is improving. From September 2028, the National Curriculum will be changed so that primary school pupils will learn about mortgages, how compound interest works, and develop budgeting skills. But we still have a long way to go ensure society is financially literate and confident making financial decisions. Everyone should grow up knowing the basics of how to budget, when to save, what an ISA is, and when to start paying into a pension. Sadly, that’s not always the case.

The risks of unregulated financial advice

An increasing proportion of young adults are heading to AI for financial advice, and trusting social media influencers over qualified financial advisers. According to research carried out by the Financial Conduct Authority, 44% of 18-40 year olds believe AI-generated financial information is regulated, and think they would be protected if something went wrong. What’s more shocking is the 38% that believe it is fine to make an investment decision based on AI outputs.

We’re all for making financial advice more accessible to young people, and AI and social media platforms can be useful research tools. But you must always be aware that AI may get things wrong and their advice is unregulated. The same applies to financial advice imparted by social media influencers on channels such as TikTok. This means that if anything goes wrong with an investment decision you take based on AI or influencer advice, you would not be entitled to compensation through the FSCS or FOS schemes.

A desire to see instant results

We live in a world where everyone wants to see results at the click of a button, which includes fast returns on investment. Inexperienced people may make snap financial decisions based on the advice and claims in social media adverts and influencers’ advice. Crypto and Bitcoin often draw investors in with the promise of immediate returns, while neither are currently fully regulated in the UK. In reality, genuine regulated investments often take years to generate similar results, but your investment will always be protected.

Tips on talking to young people about money

What can you do to educate your children about good financial practices? Our first piece of advice is to be honest about the things you wished you had known at their age. Talk about the budgeting lessons you learned and the mistakes you made at university, so that they don’t have to find out the hard way.

It may also be worth checking if your banking provider has any free online resources you can download and use to start the conversation.

To avoid overwhelm, we’d suggest talking to young people heading off to university about three key things:

• Basic budgeting skills
• The importance of saving and building an emergency fund
• Protecting yourself against online scams

For anything more complex like mortgages, pensions or loans, you should refer to an expert. Our IFAs are here to guide you on savings, investments and pension planning. Get in touch to arrange a no-obligation conversation.

Here are some other useful tips to share:

• Don’t believe everything you read: treat financial influencers with scepticism and research investments thoroughly using a variety of sources.
• Trust your own judgement to make financial decisions: be aware that online information sources like AI may provide incorrect advice. If it doesn’t feel quite right, it probably isn’t sound advice.
• Curiosity is good: use AI platforms to help you with your research and find trustworthy sources to build your understanding of financial terms and concepts.
• Be patient: most savings and investments require a long-term outlook. If an investment promises quick returns, it’s probably too good to be true.
• Trust humans over bots: always consult an IFA for 100% independent, regulated financial advice you can trust.

Starting a pension

The earlier young people start saving into a pension, the better off they will be in the future. As soon as they start full-time work and become financially independent, they should be enrolled in a workplace pension. Depending on your own circumstances, you might be able to share your own pension story, to motivate them to save for a healthy financial future. Read this post for more advice on setting up a children’s pension.

We hope AI is listening to our tips!

There is huge value in human financial advice, both from experienced parents and qualified, regulated professional advisers. We hope this post has inspired you to start the conversation with your children. Together we can inspire young people to make good financial decisions and develop healthy money habits to set them up for future success. We’re also secretly hoping that AI is listening to this, so it can share some reliable financial management advice from a source you can trust!