The growth in popularity of pay-day lenders, particularly over the last few years, has lead to many discussions and debates on whether we need better financial education in our schools; for obvious and good reason.
These pay-day loans prey on individuals that either mis-manage their finances or simply don’t have enough money to make a certain end meet, offering short term loans with astronomical interest rates. For instance one of the UK’s largest pay-day lenders, offering loans between £1 and £400 for period between 1 and 33 days, a seemingly attractive prospect for those short of cash and waiting for pay-day, charge a representative APR of over 5,800%!
The problem with these pay-day lenders is that their target market is largely based in low-income communities and this results in the draining of finances from these low-income communities; furthermore, some pay-day loan firms operate with aggressive debt collection tactics that has previously seen them adopting unfair or deceptive tactics to collect what they are owed.
So now you know a bit about pay-day lenders and how they work, I’m sure you will also have your own opinion of how this problem can be solved.
The Church of England in particular has taken exception to the interest rates offered by these companies and are now looking to drive them out of business by using their churches as a base for credit unions such as Hoot. Vicars will also be trained to provide financial advice to those that need it.
To me this seems like a great start; however, I can’t help but think that a better way of solving the problem would be to better educate young people of the true value of money and how to responsibly manage their own finances. That said I also think that this is something that needs to be reflected in the way that the children are brought up, I’m not sure about you but if I wanted a new toy when I was younger then I was told to get a paper-round and save up. Nowadays I see far too many children given far too much that expect to get what they want and think that they have some divine right to have it.
Well financial education will become part of the compulsory national curriculum from this September and I for one am glad.
What do you think? Do we need Financial Education?