Youth money thoughts

Anyone can learn about money.

Anyone can help anyone else learn.

Making mistakes doesn't mean you're hopeless.

Managing money is a lot about relationships & understanding other people.

Good financial education is not about turning people into more savvy consumers.

Good financial education starts with young people's interests and builds on their strengths.

Using default behaviour

Default behaviour, otherwise known as doing what you usually do, is a powerful force that can, with a bit of thought, be used positively. Commercial companies have known about it for a very long time. They devise  products that consciously use customer inertia to the company’s benefit. Savings accounts, for instance, often drop from paying an attractive interest rate to a very low one in the knowledge that a percentage of customers will not switch. Likewise, automatic annual renewals of insurance premiums rely on customers’ inertia.

Young people can be helped to become aware of these techniques. Every time they hear a salesperson say something like, “Don’t worry, you can sign up now and cancel it at any time” – warning bells should ring. This is designed to profit from people who will be very slow to get round to cancelling. And it works.

Default behaviour can be equally powerful when used in young people’s own interests. An obvious example would be to set up a system—such as a standing order paying regularly into a savings account—that can be left to do its good work without changing. If you ritualise a behaviour, such as saving, you scarcely notice it.

Default behaviour can also be positively used in the form of a habit that is practised so it becomes routine and “hardwired” into everyday behaviour. Checking the entries on a bank statement as soon as it arrives could become an automatic response.

Another good habit for young people to adopt is to pay for a planned purchase with a debit card rather than withdrawing cash from an ATM machine. Why? Because cash from machines comes in multiples of £10. So  the difference between the cost price of the item and the round £10 is likely to be frittered away.