Nothing against the Nationwide, or its Nationwide Education website. No doubt some  teachers find it useful.

But it would have been a lot more cheering  to see the award going to a group doing some [...]]]> Great shame that the Financial Capability Award section of this year’s Children & Young People Now Awards went to a building society.

Nothing against the Nationwide, or its Nationwide Education website. No doubt some  teachers find it useful.

But it would have been a lot more cheering  to see the award going to a group doing some  innovative face-to-face work with young people. Much better to have showcased some good practice, a project empowering young people to work out their own solutions, to develop some of the skills and attitudes that will give them confidence  in doing what they want to do with money.

Why encourage a building society website offering yet more officially sanctioned lesson plans on savings, budgeting and other widely available stuff?

For those who never spend more money than they have, it [...]]]> What will young people want to know about today’s surprise Supreme Court ruling? UK banks have won their argument that overdraft fees on personal bank accounts cannot be assessed for fairness by the Office of Fair Trading. So what’s the impact on young people?

For those who never spend more money than they have, it is probably good news. A victory for the OFT could have seen banks spreading their charges across all customers. That would very likely mean an end to free banking on current accounts – which is of great value to many young people.

On the other hand, it is bad news for those who run up an overdraft without getting agreement from their bank first.

The moralistic and solvent are likely to see it as a welcome discouragement of irresponsible borrowing. Which is nice for them. More usefully, the lesson for those working with young people is the emphasis it puts on one of the key pillars of financial capability:

• you have to keep track of your finances.

Understanding this key lifeskill, and getting the chance to practise it, is the way to go. It means knowing how much is in your pocket or your bank account at any time. It may mean getting into the habit of jotting down what you spend – so you don’t wake up in the morning wondering where last night’s money went. And the same for the past week or month. It means checking receipts against bank statements, and checking your balance before withdrawing cash.

A quick word of advice for adults – don’t presume that you know more about this than young people do. Research by the Financial Services Authority found that teenagers and retired people were the two age groups who had the most precise knowledge of what was in their bank account. They are better at it than most adults.

 One of the complicated bits of keeping track of finances is understanding the cheque-clearing system operated by the banks. To be honest, understanding it is perhaps a bit ambitious. But it is well worth knowing when a cheque [...]]]>  A young person gets a cheque. Great. That’s money – available and good to go. Er, no.

 One of the complicated bits of keeping track of finances is understanding the cheque-clearing system operated by the banks. To be honest, understanding it is perhaps a bit ambitious. But it is well worth knowing when a cheque turns into money that is guaranteed yours to keep.

 The banking industry has a memory aid – two-four-six. That relates to the number of working days after paying a cheque into an account that it becomes money.

 There are three numbers – 2-4-6 – because different things happen on those different days.

 Say you pay a cheque into an account, over the counter at a branch on a Wednesday. That is day zero. 

On Friday, two working days later, the money starts earning interest. If, that is, the account pays interest. If you have an overdraft, this is also the day that the balance on which interest is charged is reduced. 

But you still can’t actually use the money. 

That doesn’t happen until day four. On Tuesday, four working days after you paid it in, the bank will allow you to withdraw the money. 

But you still can’t be sure that the money is yours. The cheque could still bounce – that is, be refused by the other bank. In that case, it will disappear back out of your account. If you spent it, you may have to pay it back. 

However, wait till the end of day six and you can be sure that the money is yours. It is fully cleared. And even the cheque does bounce after that, you are protected from the loss. That means waiting from your initial Wednesday, day zero, to the end of Thursday the following week. Which, basically might mean Friday. (There’s an argument for the memory aid being two-four-seven on that basis.) 

All this is according to the banking code which most banks follow. Ask, or read the small print to be sure. Paying money into a cash machine may well mean day zero doesn’t begin till the following day. 

Note that because the count is working days, the effect can be quite dramatic. Say a young person is given a cheque on a Friday, and pays it in as soon as possible on Saturday. Day zero doesn’t start until the next working day – which is the Monday. So day four – when the money is technically available (but not necessarily for keeps) – is the next Friday. But the end of day six isn’t until Tuesday, or effectively Wednesday. 

It is sobering to realise that that is, from the starting Friday, actually 12 days before it is guaranteed theirs to keep. Much closer to a fortnight than the few days most people imagine. 

And if that’s all too complicated, here’s a reckoner.

 But whatever the detail, the important principle needs saying again and again. Putting a cheque into a bank account doesn’t mean the money is there. Even if it appears on a statement and seems to be “in the account”, it may not be usable yet. 

There are implications of this both for making ends meet and keeping track of finances. Failure to appreciate it can leave a young person unexpectedly without funds or expensively overdrawn. And, of course, if they are selling something, they risk being ripped off by someone who knows the system better than they do. 

More information, including leaflets to download,  from the industry body the Cheque and Credit Clearing Company.

 Cash, by the way, is credited to an account as soon as it is paid in.