Its difficult enough trying to get your kids to understand that someone ACTUALLY has to pay for the credit card and that there is no magic money tree. But more frightening the is fact that they are a couple of years away from the possibility of owning one and it is left down to the parents to explain what compound interest is – and that if they don’t understand it, there could be dire and far-reaching consequences.
Young adults today have the advantage of growing up with the technology so it is second nature to them, but they are deluded into thinking that they are ‘tech-savvy’ when it comes to understanding financial markets and institutions. Things like the value of the pound and inflation are what ‘old people’ talk about and definitely not their territory.
So I now have the task of trying to catch my two in a receptive mood and spend it on giving entertaining examples of how understanding compound interest really might benefit them – which could go either way. It could end up being one of the those wonderful moments we remind ourselves of in the future – “Oh, do you the remember the time, Dad, I realized that you really loved me when you took the time out of your busy schedule to explain compound interest to me?” It could go like that or… oh well. Never mind.
Imagine how relieved I was when on Monday the Bank of England announced that in November they will be conducting a ‘Future Forum’ and thinking of how to communicate better with this age-group. They are making big effort to make economics relevant to them. After all, these teens are the borrowers of the future.
At Henley Finance, we take a lot of care making sure that our clients understand the commitment that they take on. We find people can be successful in one area of business but when it comes to borrowing, we need to explain some of the finer points. Luckily, when it comes to detail our borrowers are more receptive than my teenagers. So good luck to the Bank of England on that one.