Socio-Economic Inequality in Young People’s Financial Capabilities

Abstract

ABSTRACT Previous research has shown that the UK has low levels of financial literacy by international standards, particularly among those in lower socio-economic groups. This may have an impact upon young people, with social inequalities in financial attitudes, behaviours and skills perpetuating across generations. Using parent-child linked survey data from 3,745 UK families, we find sizeable socio-economic inequalities in young people’s financial capabilities, aspects of their mindset, and their financial behaviours. Sizeable differences are also observed in the financial education that socio-economically advantaged and disadvantaged children receive at school, and how they interact with their parents about money. Parental interactions can account for part of the socio-economic gap in money confidence, money management, financial connections, and financial behaviours, but less so in boosting financial abilities. However, we find no evidence of differences in financial education in schools driving differences in young people’s financial capabilities.