Since late 2021, the increase of the cost of household essentials has outpaced the increase in household income, creating the cost of living crisis. Across the UK, people have experienced a tightening budget, and this has particularly affected homeless young people.
According to a Centrepoint survey of 209 young people with experiences of homelessness, one in four young people (aged 16-25) living independently have £20 or less of monthly income left after rent and bills. This leaves them with just £5 or less to live on each week. When surviving on so little, even small changes in the cost of goods can have a massive impact on their lives.
What is financial literacy?
Financial literacy is a combination of financial understanding, behaviours, emotional mindfulness, and self-efficacy that help a person to achieve financial well-being.
Financial well-being is a state in which a person is meeting their financial obligations while feeling content with their financial management.
Financial literacy empowers people to manage their finances effectively, which is essential in the current economic climate, especially for the most vulnerable people.
However, financial literacy education is currently not very effective; some studies find that traditional approaches have little to no impact on individuals’ financial outcomes. And, while 78% of teachers report teaching personal finance, only 39% of people recall learning it, suggesting these lessons may be less than impactful.
Why is financial literacy education so important for young homeless people?
Managing finances can be drastically different for a homeless young person compared to less vulnerable people.
The average person will divide their income between spending and saving: spending on groceries, a mortgage or rent, other bills/costs, and entertainment, and, saving for a specific goal, emergencies, retirement, or a holiday.
However, for a young person experiencing homelessness, things look incredibly different. Their income may be unstable, so it’s harder to plan ahead or get into a routine. Necessities will take up a higher ratio of the income they do receive, and they need to stretch it as far as possible. This means they’re unable to save much if anything, so they have no safety net to fall back on for unexpected costs and difficulties.
Considering these differences, it makes sense to approach financial literacy education differently for young homeless people.
When you think of ‘financial literacy’, you probably think about the practical side: understanding how different types of bank accounts, loans, interest, inflation, and social benefits work.
But for a young person experiencing homelessness, learning how to invest isn’t their priority at that moment. Teaching responsible attitudes and behaviours around money will be more relevant and immediately help them to move forward.
So education around this part of financial literacy involves focusing on concepts, behaviours and decisions, rather than general financial knowledge.
"Numeracy and maths don't come up too often. I think the only time that comes up is when we're doing budgeting, but it's more about the concept and more about, you know, the money you're bringing in, and the money you're spending” (John Kesrouani, Money Wise)
Another part of financial literacy involves emotional mindfulness.
Many young people with experiences with homelessness or financial hardship associate money management with shame, embarrassment, frustration, and anger.
This can cause them to avoid dealing with personal finances and can negatively influence decision-making. It can also lead to low financial self-efficacy, which can increase the likelihood that a young person will avoid financial tasks or goal setting.
Emotions have a huge impact on money management, and not everyone will be ready to face their finances and financial behaviour openly. Sometimes the focus must be on helping someone towards an emotional state of action, rather than simply teaching them information.
“Sometimes those [one-to-one] sessions don't really involve money that much. And it's more about, you know, how they're doing, how they're feeling. So we've done a lot of training around that.” (John Kesrouani, Money Wise)
Ways to help young people learn financial literacy effectively
Use the impact of emotions and experiences through media
Research has shown that entertainment like TV shows can be helpful for learning concepts. An example might be a soap where the character struggles with debt, but manages to overcome it through positive behaviours. If the character is relatable to the viewer, they might be able to empathise with them and learn from their struggle.
Share the story of an idol
Sharing stories of popular characters or celebrities working through financial issues can also help young people to empathise and be inspired.
For example, Dietmar Hamann of Liverpool FC suffered substantial losses from excessive gambling which taught him a valuable lesson about financial responsibility and the importance of a positive relationship with money.
These stories can help alleviate feelings of shame by showing how financial issues can impact anyone, and demonstrate that people can successfully work through them and recover.
Learn through simulating experiences
Simulations can be a great way for someone to learn through experience without having to actually create or encounter particular situations in real life.
These mock experiences can help build a person’s financial self-efficacy for real life financial management. The Budget Game by NatWest and Financial Football by Visa are examples of online simulations that take unique approaches to teaching financial concepts.
Moneywise
Young people being supported by Centrepoint can access our Moneywise programme to learn money management skills and gain better control of their finances. Moneywise is open to people who:
- are living in Centrepoint accommodation
- left Centrepoint accommodation in the last six months
- are being supported by a local homeless organisation who partners with Centrepoint and has referred you to the programme.
You can ask your key worker for a referral or search for the programme in the online portal.
© David Monteith-Hodge
