Memorandum submitted by the Financial Services Authority



1. This memorandum is submitted to the Committee as part of its inquiry into young people not in education, employment or training (NEET).


2. Under the Financial Services and Markets Act, the FSA has a statutory objective to promote public understanding of the financial system. Since 2006 one of the key ways we have delivered this objective has been by leading the National Strategy for Financial Capability, in partnership with the government and others. As part of this strategy, we have developed 'Young People and Money' (YP&M), a free training programme to give intermediaries and service providers (e.g. youth workers, Connexions staff and social workers), the understanding, information and skills they need to help them include personal finance in their work with NEET young people.


3. In 2005 we undertook a comprehensive baseline survey to assess the level of financial capability in the UK population. This survey found that younger people were more likely to be poor at dealing with personal finance issues. We subsequently began work to help NEET young people manage their money more effectively.


4. Our evaluation shows that our work supporting NEET young people on money issues increases their confidence and suggests they are more likely to gain employment.


5. We work with government and other partners to ensure young people have confidence and awareness in dealing with money, and to enable them to make sensible, informed choices throughout their life. We are working to increase support for our training and to enable it to become embedded in key statutory, voluntary and private sector organisations that help NEET young people. We support the government's work to address NEET young people. We are calling for more non-formal learning programmes for young people, and for soft skills (i.e. life skills) to be given greater status and prominence in formal education.


6. We outline below in more detail our work on ensuring NEET young people are confident and competent in dealing with money.


Services and programmes to support those most at risk of becoming 'NEET', and to reduce the numbers and address the needs of those who have become persistently 'NEET'.


7. In these challenging economic times, it is vital for young people to manage their money effectively. NEET young people are particularly susceptible to poor money management. In a survey by Rainer on 'Why Do Young People Pay More?' in 2008, 77% of young people are in debt by the age of 21, with this figure rising to 85% among homeless young people.[1] Our own baseline survey found that some of the factors which can reduce the chances of people being financially capable include being young, unemployed, having no or low level qualifications and/or having a low income.[2]


8. We are addressing the clear need for NEET young people to be better informed and to have confidence in their ability to manage their money. To do this, we are working through intermediaries that young people know and trust. We developed YP&M in 2006 in collaboration with Fairbridge (a charity supporting NEET young people) and Citizens Advice. YP&M is a free training course aimed at trusted intermediaries who work with NEET young people. The course aims to give the practitioners the skills, knowledge and confidence to help the young people they work with to deal with money issues more confidently.


9. This programme is delivered across the UK by Lifeline, A4E, Fairbridge and Citizens Advice Northern Ireland - organisations with excellent track records in reaching young people in the NEET group. We aim to have directly trained 15,000 youth work intermediaries by 2011.


10. YP&M consists of a free one day training course and supporting toolkit. It seeks to encourage practitioners to develop the skills needed to understand young people's attitudes towards money, and provides different techniques on how to engage with them on what can often be a daunting and challenging issue. It covers topics such as understanding how psychology has an impact on a young person's attitude to money, helping young people manage their money, and what young people can do if they get into debt. The training course is accompanied by resources designed to support practitioners to increase the financial capability of the young people with whom they work. This includes an activity toolkit designed by Fairbridge, a workbook, and a Guide to Financial Capability written by Citizens Advice.


11. YP&M is based on a non-formal approach to learning, encouraging practitioners to embed financial capability into their programmes and support young people through group and one-to-one sessions.


12. In 2007, we asked ECOTEC Research and Consulting Ltd to evaluate the impact of our YP&M training, through surveying both practitioners who have been supported through our training, and the young people themselves. Surveying over 200 practitioners and over 300 young people, the evaluation shows that the training has a positive effect on both the practitioners and, more importantly, on NEET young people themselves. As a result of the training, we found:


a 15% reduction in young people who were in debt, indicating a greater understanding of debt and debt management; and


a 17% overall reduction in the number of young people with no savings. We also found that the young people felt less stressed and more in control of their money.


13. In addition to YP&M, we are currently working with leading organisations in the youth sector (Centrepoint, Connexions, UK Youth, Youth Access, Foster Care Associates and Nacro) to embed financial capability in their training, policies, procedures and practice. We intend to produce good practice guides for these sectors on how they can embed financial capability in their work and follow this up by expanding the programme to other sectors working with NEET young people. By 2011, we aim to have achieved the support necessary for our work to become embedded in key statutory, voluntary and private sector organisations that help NEET young people.


14. Our evaluation also showed that our work supporting young people on money issues has the potential to reduce the number of NEET young people. The report found a modest rise in the proportion of young people gaining employment at each stage of survey. This suggests that those who received more support on their money matters were more likely to get a job.


The effectiveness of the government's NEET strategy


15. We support the government's NEET strategy. We are very encouraged by the popularity of the reduction of NEET young people indicator in Local Authorities' Local Area Agreements, and fully support the prominence the government gives to this.


16. We fully support the five Every Child Matters (ECM) outcomes and the government's commitment to improving the employability outcomes of young people. Being able to manage your money cuts across all five ECM outcomes, and we support work more widely to ensure that young people are prepared for employment and engage with further education, training, and employment. We have anecdotal evidence that some young people find it difficult to retain jobs because of their inability to manage their money. We would therefore encourage the government to emphasise the importance of financial capability and financial inclusion within the ECM outcomes, and would call for preparation for work schemes to include an element on financial capability and inclusion.


17. The government's emphasis on a collaborative, partnership-focused approach, working at a national and local level, is something we have emulated with YP&M. We agree with the government that it is only through working with trusted intermediaries, who have an excellent track record of engaging these hard to reach young people, that a NEET strategy can be successful. We also support the government's work in looking to embed delivery in external organisations that allow for localised, flexible models of delivery to be established.


18. Our experience shows that personalisation is key to engaging NEET young people and giving them the skills to make informed choices, and we welcome the government signalling its importance. Specifically tailored programmes for this particular group are vital to maintaining engagement. It is, however, important that this personalised support package is emphasised in the government's wider NEET strategy. Our recent evaluation shows the success of the personalised approach of our YP&M training, instilling general concepts to the practitioner, which they can then tailor and adapt to the needs of the young people they are supporting.


19. We are also encouraged by the government's promotion of young people's rights and responsibilities to access services they need, together with incentives in place to allow young people to re-engage quickly should they become NEET.


20. We fully agree with the government's continued support of the Entry 2 Employment programme, giving vulnerable young people the opportunity to earn a weekly wage and to see the benefits of employment. We would also advocate the inclusion of life skills, including learning about money, as an essential component part of this scheme. It is vital that young people are able to manage this weekly wage effectively if they are to see the value in long-term employment.


The opportunities and future prospects in education, training and employment for 16-18 year olds


21. In general, the opportunities and prospects in formal education and training give young people the choice and flexibility that is so important in ensuring they stay engaged and do not fall into the NEET category. We would, however, like to see greater emphasis on 'life skills' elements of all these formal programmes.


22. However, raising the participation age is going to be especially challenging for young people who are currently NEET and or have been disaffected from school. Our work with young people shows the clear benefits of non-formal programmes (i.e. programmes outside the classroom), and we would support strongly the inclusion of non-formal programmes within the 16-18 education and training offering. We would suggest that these could be underpinned by key principles for independent living, including practical examples of how managing money would be part of this.


December 2009

[1] Rainer 2008, 'Why Do the Young Pay More?'

[2] FSA 2006, 'Financial Capability in the UK: Establishing a Baseline'