Educating young people in the skills needed to manage their money and to budget effectively in the future may seem obvious to some.
After all, “Education is what remains when one has forgotten what one has learned at school” said Albert Einstein.
And yet little is being done to address the situation through early education.
Personal debt has reached record levels. The statistics show that this is not going away. In fact, personal debt just keeps rising in the UK. Experts say it has become one of the biggest issues facing Britain today.
The latest figures now showing personal debt levels have reached £1.58 trillion across the UK, up from £1.53 trillion in 2017.
Education in finances needs serious thought.
Perhaps it is now time to place serious thought into helping our young people leave school with, at least, the knowledge of how managing their money and budgeting could be a lifelong gain. Something tangible that will help, not just in their wider life experiences, but in everyday life too.
The importance of understanding what the real cost and impact of being in debt is like should be something everyone entering adulthood should be aware off. It is an essential life skill.
Is it the job of schools to give our children these skills?
Well, the government thinks so. They introduced financial literacy into the national curriculum in English schools in 2014.
In September 2014, financial education was made a component within the “citizenship” element of the national curriculum at key stage 3 and 4. At the time, the government said its aim was “to enable students to manage their money on a day-to-day basis, and plan for future financial needs.”
However, Head of programmes and services at Young Money, Russell Winnard, said the number of schools teaching pupils about money has stayed worryingly low.
“It is compulsory in every secondary school, though that does not apply to academies and free schools. Around 35%-45% of schools were actually delivering financial education in 2014. Two years on and we estimate it’s still only 40% doing so.
“Ticking Time Bomb of Generation Debt.”
A study released at the beginning of the year by Young Money, titled “The Ticking Time Bomb of Generation Debt” was critical of many secondary schools side stepping the changes introduced to the curriculum in 2014. They said that education about money has stalled.
The research, conducted amongst teachers for the study, yielded some interesting insights into the lives of young people. How they relate, not just to money, but the rapidly changing world around them.
What the teachers said.
They were particularly concerned about young people finding themselves in high levels of debt “made worse by extortionate interest rates”.
The study cited pressure from celebrities, reality television and social media.
One teacher told researchers:
“The pressure to get into debt is horrendous. Corporations spend billions advertising their products, while the media portrays being rich as being cool.”
Another cited television programmes. Programmes such as MTV Cribs, which features tours of the mansions of celebrities. My Super Sweet 16, about teens who “expect and will only accept the absolute best”. Social media sites such as Facebook also had a big part to pay.
One teacher told the study that parents, too, have poor money skills.
“Unfortunately, I suspect many are in debt and don’t necessarily have the skills to help young people avoid the same mistakes. External support for both parents and young people is necessary to break this cycle.”
Why are schools being slow to meet curriculum requirements?
Many schools may miss these subjects out on the basis that their teachers are simply not qualified to teach what is essentially a pretty specialised subject. Financial literacy is not part of teacher training programmes
According to Winnard it may, in part, be down to the under-confidence of teachers.
“The mandate to teach personal finance education hasn’t really worked. We need teachers to be more comfortable and confident enough to deliver high quality financial education. There is a need for much more training for teachers.”
Are students likely to engage in finance education?
According to one Academy in Haverhill, Suffolk, which is aiming to be a centre of excellence in personal finance education.
“We were doing elements of finance in maths and in citizenship. But it was the 15 to16 year-olds who said they wanted more information about loans, mortgages, interest rates and credit cards. Some teachers may be reluctant to tackle the subject because it is personal and emotive, and we always steer clear of personal circumstances.
“Most students find the terminology of finance very confusing. They don’t, for example, understand the difference between a credit card and a debit card. Why should they?”
At the Priory Academy in Lincoln, they are working on increasing the level of personal finance education. Particularly in the school’s sixth form, after feedback from ex-pupils now at university suggested that a huge number wish they had left school with more financial awareness.
“Student engagement has been fantastic. For example, students showed genuine interest in working out take-home salaries, having first to calculate a range of deductibles. Many were amazed at the amount of tax a millionaire has to pay!
“Things have changed a great deal. University fees are much higher, mortgage repayments or rent all demand a larger percentage of monthly wages, there is little interest gained for those with savings, and so it would appear prudent to educate all young people in personal finance.”
Middle class children may have a worse understanding of money.
Often, it is those from middle-income homes that have a worse understanding about money.
“Disadvantaged households see cash physically, and have a better fundamental understanding about its value, what it’s used for and where it comes from. In more affluent homes, children see money less. The concept of value, and where the money comes from, is less clear,” Winnard says.
What did the study find?
Students were opening store cards and building up significant debt at a high level of interest.
A sharp increase in the number of older students targeted for store cards, new mobile phone tariffs and download charges.
Tailored marketing to attract younger consumers and encourage them to spend more.
Accusations that young people are not fully educated on “complex and potentially damaging financial products”.
The pressure on young people can be horrendous.
The Financial Conduct Authority (FCA) said.
“Many young consumers have never experienced anything other than near-zero interest rates. With student loan debt and the relative ease of accessing credit, many may come to see high levels of debt as the norm.”
Has financial education now become vital?
Experts believe a lack of financial education in schools could be potentially disastrous for our children’s futures.
Not all parents understand or have a good grasp of financial issues and this won’t help their children. The next generation may well end up facing the same problems as those faced today by their parents.
The answer, many educationalists believe, is to focus on the basic skills of budgeting and debt management as part of GCSE maths.
They believe it will be much more useful than trigonometry. If children grow up confident with the basics they can find out what they need to know in future.
Sixth form colleges should also cover any elements of financial literacy that are relevant to the course, and teachers should be given the opportunity for free training.
Sound financial management is an essential life skill and can highlight the risk of debt. It is no different from teaching children about the dangers of smoking or drinking.