A growing number of 16 to 18 year olds are taking on financial debt without knowing the full meaning of some of the most basic financial terms, a new report has found.
Shockingly, 95% of students in this age group own a debit card without knowing what debit actually means. A number of them are looking into university places, taking on student loans and debt without knowing what some of the terms are.
A study by the Chartered Insurance Institute (CII) revealed that the majority of students don’t know what the term ‘APR’ means.
David Thomson, from the CII, commented on the findings; “Our research showed that even those teens who are learning some form of financial education could use additional support as many basic financial concepts seemed out of their grasp.”
Many students lack basic financial understanding, leading to them enter adulthood with the notion that ‘debt is just a part of life’.
“It’s crucial for this age group to have a good understanding of personal finance as many of them will set off for university and have to budget for themselves for the first time,” continued Mr. Thompson.
As students head into higher education from September 2012, they will have to pay fees of up to £9,000 a year. By the time they have completed their degrees before they enter the working world, students could conceivably have racked up £50,000 worth of debt.
Despite this, 73% of them do not know what equity means and a further 33% don’t know what credit means.
The study found that 71% of students don’t know what APR (Annual Percentage Rate) means.
Almost four in ten students have not had any kind of financial education in school. Only 16% of them say they have received a lesson on insurance and 25% of them said they touched on mortgages and basic financial concepts.
Do you feel that you have a sufficient amount of financial knowledge? Is this likely to hold you back in your chosen graduate position?