Young People: Avoiding Banking Exclusion

This paper explores the causes of exclusion amongst the British youth and the behavior that is most likely to cause future exclusion.

The paper describes basic characteristics of the British youth between the ages 16-24 years:

• Majority of the young adults are single and live with their parents;
• 46 % of young adults are employed; 38 % are in full-time education while only 16% are unemployed;
• Only half of them understand straightforward mathematical information used for different purposes and can independently select relevant information from given graphical, numerical and written material.

The paper discusses the disadvantages for the un-banked youth:

• Diversion to more expensive forms of credit, such as pawnbrokers and payday lenders;
• Exclusion from basic financial services like loans, insurance, investment planning;
• Difficulty in job search as most employers expect to pay wages through a bank.

The paper states that financial exclusion could take place during early adulthood because banks refuse to open a bank account due to:

• Bad credit history;
• Low income levels;
• Lack of identification documents other than passport and driving license;
• Youth have limited financial literacy.

Finally, the paper suggests that exclusion issues can be addressed by:

• Introducing financial literacy in school curriculums;
• Improving accessibility of financial information and products;
• Providing incentives for the youth to open new accounts and to interact with financial services.