A survey from Hargreaves Lansdown of 2,000 people this month has found that three-quarters of 18-year-olds don’t understand what a share is, and two-thirds don’t understand how pensions, inflation or interest rates work.

Sarah Coles, head of personal finance for Hargreaves Lansdown, said: “Teenagers are set to get an F for finance. Because while schools have done everything possible to prepare them for their GCSEs and A-Levels, there’s a reasonable chance they’re horribly unprepared for looking after their money.”

More than half (55%) understand the concept of savings by age 18, just 32% said they know what a pension is and only 28% know what a share is.

“Despite the fact that an awful lot of people take on student debt at this age, and even more will qualify for credit cards, three quarters of people don’t understand the rules around borrowing at the age of 18,” Coles added. “Today’s 18-year-olds will also be emerging into a world where inflation and interest rates will play a key role, and yet at 18, only 37% understand interest rates and 30% have got to grips with inflation.”

Talk about it at home

Schools try to help, but parents can also get involved.

Coles said: “In many cases, this is simply including children in conversations about money, and checking they understand things rather than assuming they’ve picked up the knowledge elsewhere. You can also help build it into their everyday life, from opening a savings account to managing an allowance or investing in a JISA for them.

“We wouldn’t expect them to emerge into the world without a basic understanding of boiling a kettle or operating a washing machine, so we can’t send them off without an understanding of personal finance either.”

The gender gap

Young girls may need more of a financial confidence boost than the boys. By 18, males are more likely to say they know more about most financial concepts and when it comes to investment, females are twice as likely to say they don’t understand even though girls tend to outperform boys in school. (Young adults have also been urged to think in the same way about their long-term financial goals as they do when selecting a partner.)

Learning more about investing becomes more important once teens enter the job market.

“From the age of 22 you’re likely to have been put into a pension at work,” Coles said. “If you don’t know anything about it, someone else will be investing for you – without tailoring it to your personal needs – and it’s highly likely you’re not keeping an eye on how they’re doing.”

How to help your teens

She offered the following tips to help teens prepare for a financial future:

1. Learn to draw up a budget. It may seem boring at first but think of the excitement of having money at the end of the month. 
2. Protect yourself from yourself. Set up a separate account for bills and essentials.  If you get a maintenance loan at university, do this on day one, because you’re only paid three times a year and it’s too easy to go awry otherwise.
3. Don’t put things on plastic without thinking. Is it something you absolutely need right now? If it’s not, don’t borrow to pay for it because it will only cost you more in the long run. The minimum repayments will look affordable, but you’ll pay a fortune in interest. 
4. Beware dipping into your overdraft. Once you graduate, you’ll have to pay it off fast to avoid huge charges.
5. Avoid store cards. They’re horrendously expensive.
6. Take buy-now-pay-later seriously. This is still a form of debt, so don’t let it add up, and don’t miss payments – which can harm your credit record.