It’s hard to believe, but in less than two years my biggest boy could be at university. As one of the youngest in his school year, it feels like that will be a bit soon. Will he be ready for independence and everything that comes with it?
One of the biggest worries for young people these days is how they manage money. It’s very easy for them to run up debts, either through the sheer cost of university or through their own naivety. A credit card can seem like ‘free money’ until suddenly they have to pay it back and can’t manage to do it. Running into debt can have long-term implications for the future.
This isn’t just a worry for me, it’s pretty much a universal worry for parents of teenagers. That’s why Online Mortgage Advisor has launched a campaign to teach young people about the implications of debt and how not managing money can have a negative impact in the future, such as making it harder to get a mortgage.
The campaign comprises a tool that shows how much money students will save if they have a good credit rating, tips on how to improve their credit file now and how to save money if they want to avoid debt or save to buy a home while they’re at university.
According to research by student money advice website, Save the Student, young people are increasingly relying on high-interest credit to get them through university. Save the Student’s 2017 Student Money Saving Survey revealed that although 83% of students use their student loan to finance their time at university, 43% are using their overdraft, 12% have signed up to a credit card and 2% use a student loan separate or in addition to their government-issued student loan.
But it’s not just all about students. In fact, the situation is even more worrying for those not at university. The Office of National Statistics has revealed nearly a third of 16-24 year olds have debts, with half of them reporting they have debts of a shocking 40% or more of their annual income.
The Money Advice Service’s Young People and Credit report revealed 37% of 18 to 24 year olds currently have one or more credit card, an overdraft or other form of borrowing, owing an average of £2,989. More than a third (37%) say they don’t have a plan to repay the money they owe and 10% say they’ve missed at least one payment in the last 12 months.
Online Mortgage Advisor aims to educate students and young people about responsible borrowing and how it can impact on their mortgage options later in life. There are a number of factors that can impact mortgage options and these vary across lenders, who each have unique criteria. Obtaining credit in the first place and demonstrating you can manage your finances effectively and make the repayments on time is essential to building your credit rating, provided borrowers can pay them back on time.
Pete Mugleston, Director at Online Mortgage Advisor, said: “We know that sometimes it’s unavoidable to obtain finance through credit cards and loans, but what young people need to understand is the impact that not managing your finances correctly and missing repayments, as well as not repaying altogether, can have on their future borrowing.”
The calculator allows young people to input their age, predicted starting salary and how much they may have saved for a deposit (or how much they could borrow from their family to put down for a deposit on a property). It then works out the best rate available for a mortgage. To highlight the impact historic credit events can have on your mortgage options, the calculator then shows the worst mortgage rate available.
“We want to ensure young people are armed with the tools and information if they decide they need to take out a credit card or loan. Our interactive mortgage calculator will resonate with them and lead them to make informed choices regarding their finances.”
Online Mortgage Advisor’s credit awareness campaign also covers mortgage credit builder tips, money saving tips and a comparison chart, showing what you are likely to earn once you have graduated.
“Although teaching young people about managing money became part of the national curriculum in 2013, it’s clear more needs to be done to help young people realise the potential damaging effects of getting into debt.
“We think it’s vital that the UK finance sector gets onboard the Get Smart About Credit initiative, promoting awareness about the issue of young people and debt. Working with banks, credit agencies, educators and other big players in the finance space is necessary in order to stamp out debt for young people.”
I will certainly be getting my son to take a look at the calculator so he fully understands the implications of spending in his student days on his future finances.
Online Mortgage Advisor is encouraging everyone to share their #topmoneytip across social media, in the hope it’ll help students and young people avoid getting into debt.
What’s your tip?
This is a collaborative post.