"As property prices continue to rise faster than wages, educating young people about mortgages and financial planning is important to help them understand the challenging housing market. The last thing young adults need is to be burdened with a property they cannot afford or maintain due to excessive costs"
- Pete Mugleston - Online Mortgage Advisor
Stepping onto the property ladder as a first-time buyer can be a daunting and complex task, especially for young adults who may not have much knowledge about real estate.
Unfortunately, current secondary school curriculums tend not to teach this crucial life skill. They are leaving many young adults ill-prepared for one of their most significant future investments.
Why is property literacy so important?
Understanding mortgages and interest rates is a necessary life skill that can empower many young adults. By teaching students how interest rates influence mortgage payments, we can encourage them to make more informed decisions about when to purchase a house and what they can realistically afford.
As property prices continue to rise faster than wages, educating young people about mortgages and financial planning is important to help them understand the challenging housing market. The last thing young adults need is to be burdened with a property they cannot afford or maintain due to excessive costs.
This has always been preached by Martin Lewis, who has long advocated for financial and property literacy to be taught in schools. Students who can grasp property and personal finance concepts earlier will have a healthier financial future which can help mitigate the risks of debt and poor money management.
Parents should help educate their kids
For parents, the task of introducing these topics might seem daunting but it can be approached through practical and everyday discussions. Simple activities like involving young people in household budgeting or planning for a big purchase can lay the groundwork for understanding more complex financial concepts like loans and interest calculations. Parents can also use online resources, like Snoop or Emma, to help their kids manage their own money from an early age.
The goal should be to make children familiar with financial jargon and processes, making a complex topic easier to understand.
Here are three financial topics parents should educate their kids about to help them be prepared to tackle the property market:
The power and dangers of credit cards
Credit cards are a powerful tool that, if used correctly, can help build good credit which is beneficial for future financial decisions like securing loans and mortgages. However, young adults should also be aware of the dangers credit cards can pose. If they overspend and create poor money habits, it can lead to large amounts of unsustainable debt and poor credit scores.
How mortgages work
When teaching young adults about property, one of the hardest concepts to wrap your head around is how mortgages work. Parents should explain that a mortgage is essentially a loan for purchasing a property, where the property itself serves as collateral.
It is also important to discuss the need for a deposit that is paid upfront when you get a mortgage and how the size of your deposit greatly impacts the amount you can borrow. Parents should also discuss with young adults how the current interest rates will influence their monthly mortgage payments and the overall cost of their loans over time.
The importance of smart saving
Creating a savings account and encouraging the habit of regular savings is perhaps one of the most valuable lessons a young person can learn. Parents should encourage their children to save a portion of any money they receive, whether that is from pocket money, gifts or part-time jobs. This will help form good financial habits early on, teaching the importance of saving for significant purchases and fostering an appreciation for the value of money.
