Rising youth involvement in economic crimes highlights the urgent need for robust financial education.
‘Doctor’, ‘firefighter’, ‘builder’, and ‘astronaut’ are the usual quips from children wide-eyed with excitement. However, young people are increasingly falling into careers of economic crime under the guises of hackers, fraudsters or money mules. According to Cifas, one in five suspected money muling cases filed to the Cifas National Fraud Database involves young people aged 21 and under.
Fraud attacks targeting youth, including online scams, phishing attempts, fake scholarships, identity theft, and money muling, often take advantage of their inexperience and lack of knowledge. Exploiters target children by promoting ‘money-making’ opportunities on social media and gaming platforms with flattery, gifts, gaming credits and skins. The Government’s 2021 Gambling Act Call for Evidence revealed that 55,000 children have developed gambling-related issues, and there was a 73% increase in the number of children aged 11-16 involved as money mules between 2016 and 2018.
Financial fraud severely affects youth, causing financial loss, credit damage, psychological harm and long-term mistrust in financial institutions. Victims can face suspended bank accounts for five to seven years, and teens can receive up to 14 years in prison, with fraud markers lasting up to six years. A suspended account prevents young people from earning money or planning their future and can leave them vulnerable to further exploitation. The Children’s Society is changing the dehumanising language used by banks and organisations, shifting from ‘money mules’ to ‘child financial exploitation’ victims to minimise repercussions when they access higher education and jobs.
As smartphones, online gaming, and social media become more accessible to young kids, the risks of gambling, scams and exploitation are increasing. Children must develop their digital literacy and financial literacy skills in tandem. From opening the first bank account to education loans, mortgages, insurance, and pensions, the importance of continuous reinforcement of financial skills throughout an individual’s life cannot be overstated. To yield long-term results, the remediation efforts must shift from the symptoms of crime to the cause of financial abuse.
Research from Cambridge University has suggested that children develop beliefs and attitudes about money from the age of seven, which eventually moulds vital money habits that could inform lifetime wellbeing, better job prospects and higher earning power.
Abraham Maslow’s hierarchy of needs explains the importance of achieving harmonious financial well-being, which suggests that individuals are driven by the necessity to meet basic needs before achieving higher levels of psychological and self-fulfilment. Applying financial competency to this framework implies that the individual moves from financial survival to stability to agency. In today’s complex economic, social and political climate, where we spend most of our daily lives online, balancing these needs is often tricky.
When financial survival or stability is at risk, individuals develop unhealthy risk tolerances. They are susceptible to falling into Albrecht’s Fraud Triangle of opportunity, rationalisation and pressure, either as a victim of third-party fraud or a perpetrator of second-party and first-party fraud. Cifas’ 2023 research indicates a growing concern about attitudes toward first-party fraud, with 1 in 8 adults admitting to committing some form of it in the past year. Additionally, 1 in 6 adults reported that they or someone they know have provided false salary information to mortgage companies, while 1 in 20 admitted to or knew someone who had committed chargeback fraud. Alarmingly, 14% of respondents did not believe it was illegal to provide misleading information, and 9% considered this behaviour ‘reasonable’. The normalisation of first-party fraud reflects societal influences and the easy temptations present in our digital lives.
With the rise of digital cash and payments, children and young people now engage with money in novel ways, often having more unsupervised access to it than before. Gen Z and Gen Alpha are the first cashless natives and they trust social media apps over financial institutions. A comprehensive U.S. consumer research study conducted by FIS Global reveals that 40% of Gen Z and 36% of Millennials surveyed reported that they are learning about finance from social media platforms. This trend presents both opportunities and challenges. While social media can democratize access to financial knowledge, it also exposes them to greater risk. In October, the FCA interviewed 20 ‘fin-fluencers’ under caution, individuals who may be touting financial services products illegally, which can distort young people’s understanding of finances and leave them vulnerable to potential scams and financial abuse online.
Being able to better categorise spend decisions between want and need from a young age can lead to less reactive purchases, propensity to save more, make risk-balanced decisions confidently.
According to Cifas research, many people simply don’t know that certain acts constitute ‘fraud’. The UK has one of the lowest rates of financial literacy compared to similarly advanced economies, with only 47% of adults scoring five or more (out of seven) on financial knowledge questions. Moreover, 70 percent of UK adults believe that a better financial education during their school years would significantly improve their ability to manage their finances in the face of economic challenges.
Having a financially literate population brings far-reaching fiscal and social benefits—from bolstering financial well-being by promoting healthy behaviours to fostering financial resilience against unexpected shortfalls and stresses, preventing harmful behaviours such as problem debt and gambling, protecting people from financial scams and abuse, and reducing socio-economic inequalities.
Maslow’s hierarchy offers an insight into the various levels at which individuals prioritize their financial decisions, whether to earn, spend, save, borrow, manage or protect their assets. By tailoring financial education to meet individuals where they are in this hierarchy by age, gender, race, disability or socio-economic status, it ensures that foundational financial literacy is built progressively and sustainably, reducing the likelihood of perpetrating or being a victim of financial crime.
An effective financial education programme imparts the knowledge and skills necessary to make informed financial decisions and contribute to a more inclusive and equitable financial system.
Several initiatives have been deployed across the UK to tackle disparities in financial education and fight financial crime. The Money and Pensions Service (MaPS) launched seven innovative projects aimed at enhancing the financial well-being of children and young people, especially those from disadvantaged backgrounds. The most recent is an online resource named Talk Learn Do, which encourages parents to discuss financial matters with their children. This initiative aims to facilitate these conversations, fostering financial literacy from an early age.
High-street banks such as GoHenry, Barclays, NatWest, HSBC, and Santander are also pivotal in promoting financial literacy among young people through education apps, delivery in schools, or independent money missions. These endeavours signify a major shift towards interactive and practical financial education tools that resonate with young learners.
However, topics like money muling and financial crime are not areas teenagers actively seek information about. UK Finance has teamed up with Cifas and iChild to address the concern of money mules among children aged 10-14 via the ‘Don’t be fooled’ pilot programme. This initiative provides cross-curricular resources, spanning English, Drama, and Art & Design, catering to various learning styles and available in both English and Welsh, underscoring the significance of comprehensive financial education in preventing financial crime among young people.
Despite financial literacy being recognised as a critical life skill, current educational programs in the UK struggle to effectively engage their intended audience. Issues such as low school participation, limited funding, fragmented policy approaches, and socio-economic exclusion prevent individuals from receiving the necessary education to navigate pivotal financial moments in life.
The nexus between financial crime and financial literacy is intricate and requires a balanced and multi-faceted approach with continuous innovation and collaboration between public and private sectors. UK Finance’s Financial Education Report 2024 proposes several recommendations, such as the integration of financial education into the national curriculum, making it mandatory across all schools, including academies and free schools, implementing a structured learning roadmap, introducing practical mathematics education, enhancing support for teachers and importantly increasing sustainable government funding.
Engaging young people through dynamic and relatable educational content, leveraging the power of social media and addressing the specific needs of diverse populations are crucial steps to equip them with the tools they need to navigate the financial landscape safely, reduce vulnerability to financial crimes and build a more resilient financial system. Ultimately, long-term gains will only be realised if the foundations are strong. Healthy money skills must be second nature from a young age, akin to social safety skills such as the ‘green cross code’ or ‘stranger danger’. Perhaps ‘fraudster monster’ could catch on.
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