Financial Education UK: The Hidden Reason Young Adults Struggle to Budget

Financial Education UK: The Hidden Reason Young Adults Struggle to Budget
Only 26 per cent of young adults in the UK recall receiving any form of financial education in school (source). And yet, they’re expected to navigate rent, bills, taxes, credit, and savings without that foundational knowledge. So why do so many young people struggle to budget? The answer is not irresponsibility, it’s education.

What Is Financial Literacy?

Financial literacy means understanding how money works daily. That includes budgeting, saving, managing debt, using credit wisely, and planning for the future. In UK education, it’s often called financial education or financial capability. For example, being financially literate means, you understand what an APR means on a credit card, or how to compare energy tariffs to reduce bills.
In short: financial literacy is your toolkit for making smart money decisions.

Benefits of Financial Literacy for Young Adults

Being financially literate provides young adults with the knowledge and confidence to manage their money wisely.
Key benefits include:

1. Better budgeting: Know how much to spend vs save
2. Avoiding debt traps: Understand interest, credit, and borrowing risks
3. Saving and investing earlier: Build wealth from a younger age
4. Reduced stress: Feel in control of finances, even during tough months

These life skills lead to greater financial freedom and more opportunities, whether it’s affording a home, travelling, or investing in your future.
A diagram of a budget

Financial Literacy in UK Schools. Why It Should Be Taught

According to a 2025 report, only 1 in 4 young adults in the UK had any financial education at school (source). Yet, schools are where many life lessons are taught, except, it seems, for money.

Why is this a problem?

PSHE lessons (where personal finance is often taught) are inconsistent and often deprioritised.
Most students leave school without understanding credit, mortgages, taxes, or budgeting Lack of formal education creates knowledge gaps that become real-life financial issues Teaching financial literacy in schools prepares students for adulthood: paying rent, handling student finance, understanding payslips, budgeting for food, and more.

The Hidden Reason Young Adults Struggle to Budget

So, what’s the “hidden reason” behind budgeting struggles? It’s the financial education gap. Without being taught the basics, many young adults:

• Don’t know how to create a realistic budget
• Fail to grasp how credit card interest works
• Lack the habit of saving regularly
• Confuse “good debt” (e.g. student loans) with harmful high-interest borrowing

It’s not about laziness. It’s about not being shown how.
Once you recognise this gap, you can start closing it and improving your financial future.

How to Improve Your Financial Literacy (and Budgeting Skills)

You don’t need a degree in economics. Here’s how to boost your financial knowledge and budgeting ability today:
Checklist of financial tips for young adults

1. Start a Simple Budget
Try the 50/30/20 rule (needs/wants/savings).

2. Use Free UK Financial Resources
Visit MoneyHelper for guides, calculators, and budgeting templates.

3. Build a “Freedom Fund”
Set aside even £20 a month to start. Having an emergency fund reduces stress during unexpected expenses.

4. Learn About Credit
Check your credit score. Understand how APR works and always aim to pay off credit cards in full.

5. Explore Basic Investing
Understand how ISAs, compound interest, and pensions work. You don’t need to invest right away, just start learning.

6. Seek Support When Needed
Don’t try to do it all alone. For one-on-one guidance, speak with a trusted adviser.

Get in touch with our financial advisers for help with budgeting, saving, or investing wisely.

Frequently Asked Questions (FAQs)

What is the meaning of financial knowledge?

It refers to your understanding of key money skills: budgeting, saving, debt, and financial tools like credit cards or ISAs.

Why is financial literacy important for students?

Because it prepares them for adult life, like paying bills, managing debt, and avoiding common financial mistakes.

What are the 5 principles of financial literacy?

Earn, Spend, Save & Invest, Borrow, and Protect. These pillars form the basis of managing money wisely. How do I know if I’m financially literate? If you can manage a budget, understand debt, make saving a habit, and use financial tools wisely, you’re on the right track.

How can I improve my financial literacy on my own?

Use trusted websites, apps, and books. Track your expenses, follow finance blogs, or take free online courses.

Conclusion & Next Steps

Budgeting struggles are not about failure, they’re often about a lack of knowledge.

Once you understand what you were never taught, you can take control of your finances today. Learn. Budget. Save. Ask for help when needed.

With the right tools and habits, financial confidence is just a few steps away.

Get in touch with our financial advisers for one-on-one budgeting and financial guidance tailored to your life.

References & Resources

FT Adviser – Only quarter of young adults receive financial education in school
MoneyHelper – Cash savings at a glance
Wealthify – What is the UK’s level of financial knowledge?
Investopedia – Financial Literacy Definition
MoneyHelper – Budget Planner Tool
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