Incentivised savings accounts and changes to the way student debts are managed could help combat the financial struggles many youngsters face when they leave education.
That’s one of the messages from a new report from the Association of Chartered Certified Accountants, which examines the impact of the “massive” debt that pervades the most vulnerable groups in society.
The report, ‘Britain’s debt: how much is too much?’, outlines some recommendations for students, many of whom start off their working lives having already accumulated crippling debt.
These include helping students to balance their finances in line with real-world expectations by bringing about monthly maintenance payments, and setting up savings accounts with incentives attached.
Anthony Walters, head of policy for ACCA UK, said: “Introducing monthly maintenance payments instead of paying one-third of the annual amount at the beginning of each term is a simple change with big potential benefits.
“This already happens in Scotland and mirrors how payment is received in the working world much more closely, so helping students learn the valuable skill of managing their finances over time.
“Under-18s should be offered a matched savings account based on an ISA incentive, whereby if the account holder saves, say £1,000, the government would match this amount once the young person enters further or higher education.
Knowledge is power
“Around 40 per cent of full-time students leave education with an overdraft. The average balance among them is £894 in debt.
“A savings buffer of £1,000 could therefore save the majority of students from having an overdraft at all.”
Walters added that it is crucial for the long-term viability of the economy – and for the well-being of the workforce of the future – that young people are educated on how to manage their finances effectively.
“A sound understanding of financial management that is practical enough to be applied to the real world is vital to becoming successful, worry-free adults. Helping people understand their relationship with debt and credit at an early stage is a crucial part of that.”