Last month over 120 MPs backed a move to teach financial education in schools. With student debts set to rise and people being forced to take greater control of their finances, the need to be financially astute from an early age is becoming more pressing. What is more, the global financial crisis has only added to this problem. Yet, ironically, the subsequent government cutbacks mean the subject is now less likely to make it onto the curriculum. Are we doing enough to ensure that our future generations can cope in this ever complex financial world?
The argument for financial education in the classroom seems stronger than ever, with MPs recently forming one of the largest ever all-party parliamentary groups in an effort to help youngsters in, what they call, an ‘increasingly complex financial world’.
What’s more, research from the National Institute of Adult Continuing Education (NIACE) claims there needs to be a shift in attitude towards maths as figures show those with poor numeracy skills at school are more likely to end up out of work.
Indeed, few would argue with the fact that the financial world is becoming more and more complex.
The credit crunch has meant everything we knew about finance was turned on its head. Subsequent spending cuts and changes to policy mean final salary pensions will be a thing of the past while university fees will rise considerably.
In short, anyone entering into adulthood with no concept of financial awareness is in for a tough time.
The Campaign
Price comparison site MoneySavingExpert.com has been campaigning for financial education in schools for some time and a survey set up by the site and Mumsnet.com garnered over 30,000 signatures.
“The modern UK has a nasty debt habit,” says MoneySavingExpert founder Martin Lewis. “While many of the grandparent generation follow the ‘neither a borrower nor lender be’ mantra, some of today’s parents are debt–bingers relying on plastic as a crutch to fuel unsustainable lifestyles.
“We’re left with an unnatural juxtaposition; borrowing has lost its stigma. After all, we need it to buy houses or get educated yet we’re a debt–illiterate nation. And while we need to accept that debt used correctly is a powerful enabler, too many still get burnt. So the challenge is what and how we teach our children to stop passing on bad messages and break the cycle of debt.”
Lewis says current financial education in schools is provided on an ad hoc basis by banks and could be a front for publicising the brand.
“It was once calculated people are more likely to get divorced than change bank account,” he says. “So if banks bribe 10-year-olds to join with a cheap plastic toy, they may still have them as customers half a century – and thousands of pounds in profit – later.”
Curriculum-based education
Non-biased government-backed financial education is certainly something that has support from the financial industry.
Rod McKee is vice principal at the ifs School of Finance, a registered charity with more than 130 years experience in delivering financial education. He says it is vitally important to educate young people about finance to prepare them for the increasingly complex financial world they will face, whether going on to higher education or entering the world of work.
McKee says the ifs surveyed 1,000 schools and colleges to establish the views of students and teachers and asked ‘which qualification outside of the English Baccalaureate do you think is the most important?’” According to the survey results, both teachers and students thought that personal finance was the most important outside the E-Bac; 34% of teachers said so, as did 40% of students.
Ray Allan, assistant head teacher at Henry Compton School, Fulham, agrees with McKee. “Personal and domestic finance are massively important” he says. “Knowing how to set up bank accounts, understand statements and basic financial contracts is essential for anyone who is paid by PAYE. Interest rates and financial penalty issues will affect everyone and so students must be entitled to learn about them.”
Allan says that any of us can add to the list of essentials, which must mean there is a clear need for a basic curriculum for all.
“An increased knowledge of mortgage issues is surely important if we are to try to bridge gaps between richer and poorer, since ignorance about mortgages will be the limiting factor in aspiration,” he says. “Buying versus renting should be explored.”
Current teachings
The ifs is currently teaching around 23,000 school students in over 400 schools but at present it is not statutory for personal finance to be taught in schools and colleges.
The previous government were said to be introducing a bill for it to be statutory, but there was insufficient time for this to go through parliament before the last election.
While the recent MP vote is a positive step forward, it has yet to be decided how any education would be structured.
The ifs believes that a structured, accredited course is the most successful way to deliver personal finance. This view is shared by Ofsted in their ‘Developing Financially Capable Young People’ report (2008) and also backed by The University of Manchester in their ‘Financial Literacy Project’ (2006).
Ofsted claims: “QCA accredited courses such as those offered by the ifs School of Finance, were found to stimulate … a more coherent curriculum and a sharper focus on learning outcomes”.
Their report also found that there was often a lack of coherence in provision when personal finance education was taught across several areas of the curriculum.
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