Author: Simon Cadbury
Many students aren’t always great at managing their money. For some, it’s the first time living away from home, and not being able to rely on their parents if they suddenly find themselves in the red can be daunting and take a while to get used to. Digital banking software should give them the support they need.
The draw of the odd night out at the Student’s Union, the fancy dress pub crawl round town or the instant gratification of a Chinese take-away at the end of a long day can all add up.
Living beyond your means can be a dangerous matter – whilst a cheeky purchase can at first provide an emotional rush, this can quickly turn into guilt, leading to avoidance of the problem at hand. Sometimes, the guilt racks up so much that even glancing at their bank balance can be too much of an ask, leading to the creation of an “ostrich effect”. The balance is therefore neglected, and the student plunges further and further into the red.
Our research found that the so called “ostrich effect” is rife amongst young Britons, with one in three (32 per cent) 18-24 year olds admitting to being scared to check their bank balance. It also found that 34 per cent expect to go into debt this year alone, and analysed the mental impact of such financial struggles, revealing that almost half (46 per cent) o young Brits said they worry about their debt and personal financial situations.
A digital banking software provider has a key role to play in helping young people keep their spending on track and under control, and need to do more to cater for this audience. Our research indicates they may not be adapting quickly enough to changing consumer behaviour, as spending may be being encouraged by the rise of new, innovative payment technologies. For example, a quarter (25 per cent) of young people claim they spend more with technology such as Apple Pay because it’s easier and quicker than alternative methods.
At a time where spending is as easy as swiping right or scanning your fingerprint on your smartphone, more needs to be done to help students keep on top of their finances. Increased access to digital budgeting tools which provide greater visibility of spending and debt levels could be the answer to students’ problems, with nearly a quarter (22 per cent) saying they would be less likely to go into debt if their bank provided them with better digital money management tools.
This “ostrich effect” is one that must be addressed by banks and financial services providers sooner rather than later, helping young people stand on their own two feet and regain control of their own finances.