Standing on one's own two feet

April 15, 2020

Volkswagen Financial Services instruct around 150 commercial trainees at Volkswagen AG every year through the seminar "My finances – I've got a grip on them". Its objective is to teach people how to manage their own finances with ease and confidence.

20 pairs of inquisitive eyes are directed at Janine Müller and her colleague Tanja Pleil. "So, which of you has ever taken out a loan," Müller throws the question provocatively into the room. Nobody in the group raises their hand. "And which of you has a cell phone contract in your own name", adds Pleil, whereupon almost all the hands shoot up. "Congratulations. In that case you've also got your first entry in the credit bureau database." The participants exchange questioning glances: credit bureau? The young people present are all commercial trainees at Volkswagen AG. The seminar "My finances – I've got a grip on them" is a compulsory component of their training. "And for good reason," says instructor Torsten Hermann at Volkswagen AG, "because for most of them this is the time of their first permanent job, their first fixed salary, the first car and, for some, even the first four walls of their own. This also brings the trainees face to face with the reality of a financial responsibility that is hardly ever taught at school. That's why we decided to include this subject at an early stage of their training."

Volkswagen AG is supported by Volkswagen Financial Services in this endeavor. For the world's largest automotive financial services provider, basic economic education and financial literacy is an important topic area in its corporate responsibility strategy. The financial arm of the Volkswagen Group was already involved as a partner together with other companies in the initiative "My Finance Coach" that started in 2013. As a result, it dispatched many "finance coaches" – volunteers from the staff – into numerous schools to teach children and youngsters how to manage money responsibly in classroom visits. Following the end of this initiative last year, Volkswagen Financial Services are making the instruction material that was used available to teachers and educators as a free download. In addition, employees of Volkswagen Bank direct have been imparting basic financial knowledge to the commercial trainees at Volkswagen AG for several years. Around 150 of this next generation are coached in this way every year. The two instructors Müller and Pleil normally work as customer consultants at Volkswagen Bank direct. Dealing with accounts, loans, insurance policies and financial investments on a daily basis is part of their business routine. "We want to empower the trainees to deal sensibly and prudently with their income and expenditure in order to counteract at an early stage the risk of debt becoming an issue," says Müller.


And there's good reason to do so. After all, spending money has never been easier. Cashless payment via app or via the RFID chip innocently embedded in the credit card, zero-percent financing, in-app purchases, and a lot more besides: just a few clicks and the next online item is effectively ordered — quickly, easily and reliably. What's good for the economy, however, often turns into a problem for many private households. The other side of the consumerist coin is that currently around ten percent of adults in Germany are over-indebted, i.e. too deeply in debt for their own good. The problem here is not the debts themselves, but that they are disproportionate to the earnings coming in. This means that these individuals (every tenth adult) are no longer able to pay their bills in the long term and have "sustained payment problems", as it is called in official German. (Source: Statista)

To counteract such a development, young adults in particular should be sensitized as early as possible towards the importance of handling money responsibly. "Despite this need, young people hardly receive any structured information on the subject at all. A lot depends on the situation in which they are brought up at home or whether their schools see fit to address the issue as part of project weeks, for example," Pleil points out. It is therefore no surprise that, according to the Federal Association of German Debt Collectors (BDIU), the second most significant reason for the youth debt of 18- to 24-year-olds is the bad example set by their parental home. The most relevant cause, however, is their excessive consumer spending. This is also confirmed by the German Federal Statistical Office. According to its data, debts to telecommunication companies – simply put: cell phone contracts – are the most common single item owed by debtors in this age group. The key message here is that, for most of these individuals, uneconomical budgeting is the reason for their plight.

That's why maintaining a simple housekeeping book is the first central topic of the seminar. The task for all the participants involves working with three case studies to show whether the respective person can afford the monthly leasing rate for a VW Golf, a VW Tiguan or a VW Arteon. The result: a Golf? Can be done! A Tiguan? Things get tighter, but it's still feasible! An Arteon? Better wait a few more years until the salary's gone up a bit more! Afterwards, all those taking part are given a small info sheet. That's where they can set down their first rough budget account and compare their monthly income and expenses. Important: the trainees should keep around ten percent of their salary back for their individual reserves and for their old-age provision.

Disability insurance also plays a major role. "In our early 20s, we are naturally reluctant to confront the possibility of occupational disability and our incapacity to work. But the sad fact is that every fourth German becomes unable to continue working at some point during the course of his or her life. This hits young people particularly hard, since they still have their entire working life ahead of them and the financial support they can expect from the state is far from sufficient. We should make our own provisions for this eventuality early on," says Müller. The various types of credit, the pitfalls of sureties and guarantees, and the basics of investing money are also topics adequately covered in the seminar. "Needless to say, we can't provide in-depth financial advice as part of the instruction. Nor is that our objective either. What's more important is that we point the way, that we give young adults an orientation to help them develop a feeling for financial matters," says Pleil.

And the thing about the credit bureau? "You shouldn't be afraid of being recorded in a credit bureau database," Müller tells the participants. After all, in the final analysis such an agency is good for both banks and borrowers since it protects both parties from making bad credit decisions. But take my advice and save up for your first expensive flat-screen TV instead, and keep that credit bureau entry for the really important things in life.“

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