From education to employment

Lives of care-leavers impacted by “chronic” gaps in financial education

The All Party Parliamentary Group (APPG) on Financial Education for Young People today launches its report into the current state of financial education available to children in the care system.

As at 31st March 2018 there were 75,420 children in care in England, including those in foster placements, children’s homes, semi-independent living arrangements and secure units.

Young people in the care system leave care and reach independence from age 16, and become fully independent at 18 – an age at which 90% of the general population are still living at home. 

However, the report finds that the vast majority of these children are not provided with sufficient preparation during the course of their education or in the years shortly following independence, to enable them to manage their money (e.g. how to budget, pay household bills, saving) – a crucial skill for adult life.

The APPG, for which Young Money the financial education charity acts as secretariat, found this particularly concerning given that children in care are in danger of being drawn into crime, or find themselves victims of fraud or identity theft. The rise of ‘county lines’, in particular, has seen a steep rise in the number of young people groomed by criminal gangs to run drugs across the country, and there is a huge increase in the number of young people acting as ‘money mules’, with Cifas reporting a 26% increase for under 21 year-olds between 2017 and 2018.

According to Julian Knight, MP for Solihull and Chair of the APPG, “Each year, thousands of young people leave the care system with little or no experience or understanding of how to manage their day to day finances. 

“Required to navigate a range of complex requirements and daily tasks such as paying rent, bills, buying household supplies and budgeting for food and transport – often with limited means – they can find themselves unable to cope and can easily get into debt, or – at the worst – at the whim of criminal gangs.”

The report is based on the findings of an inquiry undertaken in the first half of the year which sought to understand the measures being undertaken to support children in care in terms of the financial education they receive – and what more can be done to support them in understanding how to manage their finances and in forming positive financial habits.

It looks at the specific problems children in care face in accessing and benefiting from financial education, and makes a series of practical and concrete recommendations on how to improve the current position.

Macaulay, who has recently left the care system, said “I was in a pupil referral unit and they did not teach you anything about financial education. They just teach you to do maths, science and english and then expect you to be on your way.”

Michael Mercieca, Chief Executive, Young Money, said “So much of the future of children in care depends on their being adequately prepared in terms of their personal finances. Managing this requires a combination of knowledge, skills, attitudes and experience, all of which must be in place before a young person leaves the care system.”

“While there’s no one silver bullet that can enable this, it’s clear that a number of stakeholders – central government, local authorities, carers, schools, Ofsted, and the financial and voluntary sector – have a role to play in ensuring children in care are provided with a solid foundation for independent lives, careers and families.”

Sarah Porretta, Director of Strategy and Insights at The Money and Pensions Service, commented:
“Our research shows that young people leaving care often become financially independent earlier and with less support than their peers. Financial education is essential for every child and young person, and the Money and Pensions Service is committed to equipping and empowering children and young people with the skills to manage their money with confidence. Targeted support for those who face additional or unique challenges, including care leavers, can make a significant difference in their ability to manage their money independently. We were pleased to contribute to this important inquiry, which adds new understanding to the ways financial education could be improved.”

Stuart Haire, Head of Retail Banking & Wealth Management at HSBC UK commented: “HSBC UK is committed to helping ensure children in care and young care leavers are equipped with the necessary practical tools such as access to banking services, as well as the necessary know-how in terms of a general understanding of how to manage their own finances when they reach independence. We commend this report to our colleagues in the sector and look forward to seeing its recommendations enacted’. 

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