The fight for financial education

financial education©

MPs and charities are pushing for classes in credit cards and lessons in loans.

They say it's because Britons essentially misunderstand financial products that they so often end up drowning in debt. Make financial education mandatory in schools and that'll solve the problem.

Justin Tomlinson MP, Chair of the all party parliamentary group (APPG) on financial education, for example, has said:

"Through my MP casework, I have seen first-hand the implications for those who have made poor decisions, too often through a lack of understanding," he said.

"I am passionate that financial education is the best way to equip all young people with the relevant skills to make informed decisions and empower them as consumers."

Is that true? And, if so, what will these behaviour changing classes consist of?

The need for money classes

The answers to those questions will be necessarily messy but here's a question that seems to have one simple answer wherever you go: do we need money classes? Answer: yes.

There's no shortage of research which claims to show that we don't really know what we're doing with our money and no difficulty in getting people to agree they could have done with some help.

RBS research commissioned in 2007, for example, found that 90% of adults claimed to have never received lessons on managing money at school.

66% of the same sample agreed that lessons would have left them better equipped to deal with the financial challenges they faced in later life.

Learndirect, the Government backed teaching organisation, found that nearly 80% of people who found themselves struggling financially were unsure which allowances and benefits they were entitled to claim.

Around the same proportion found it difficult to obtain value for their money or struggled to understand the ubiquitous small print that accompanies financial correspondence.

Despite the wealth of resources online, moreover, more than 25% of respondents said they found it difficult to shop around for the best deals on gas, electricity, television and mobile phone packages.

And as research from peer-to-peer lender Zopa has revealed, when it comes to understanding how banks actually work we fare much worse.

93% of UK consumers aged over 18 confessed that they didn't understand what a bank spread is, the IPSOS Mori poll found and, of those that said they did, less than half explained the concept correctly.

Financial home schooling

But Zopa's technical questions aside, isn't the place for most personal finance education in the home, not the classroom?

Barclays researchers found in a 2010 poll that home schooling is certainly the reality now.

Just 4% of 16 to 18 year olds remembered getting advice or information on money from their school or college in the past year.

90% of the same sample said they had got financial information from friends and family in the same period while 63% got advice from their bank.

According to research commissioned by Capital One in July 2011, 65% of the parents plan to, or have already, taken steps to educate their children about their finances. That's higher than the proportion who plan to, or have, sat down with their children for some home sex ed.

Perhaps because of the high proportion planning on some money home schooling, the same research found that more than half of parents (55%) aren't worried about how their children will manage their finances as they get older.

However, a poll of Moneysavingexpert users found that although 52% thought that parents should take responsibility for financial education 97% were broadly in favour of financial education in schools too.

We can probably more or less agree, however, that 'financial education', very broadly defined, is one of those policies that it's most appealing to agree with before you have to get into the details.

Start asking what money education will replace in timetables, what we'll teach or, God forbid, who's paying, though, and some people might rather stay at home.

Nevertheless, let's ask.

What kind of financial education?

The APPG that Justin Tomlinson's a part of opened financial education to a consultation.

The result was a fascinating insight into the many small scale practical projects masterminded by a few teachers or ex bank employees and large-scale resources offered by banks. If there's one thing we can say it revealed, it's that currently financial education is massively variable.

Since 2006, for example, 70,000 UK teenagers have taken a GCSE, AS level or A level equivalent qualifications in personal finance awarded by the ifs School of Finance, a registered charity.

Meanwhile, pupils at one school in London get lessons in money from Jon Goldhill, part of a group of retirees from relevant professions, who told the consultation that "teachers have little or no practical experience and lack credibility".

National curriculum

The obvious way to standardise to some extent is through the National Curriculum.

"Ideally, we would like to see financial education become a compulsory part of the National Curriculum, something we have called for over a number of years," Credit Action have said.

Moneysavingexpert agree: "The problem is very simple, we need to ensure every child, in every school understands money, consuming and debt and the only way to make that happen is to ensure it is a substantial, compulsory element of the curriculum."

That, too, seems to be the way Government will proceed.

In response to a financial education online petition which attracted 10,000 signatures a spokesperson said that money lessons were already part of the Personal, Social, Health and Economic (PSHE) syllabus and that "we are currently carrying out a review to determine how best to support schools to improve the quality of all PSHE teaching".

Tomlinson (him again) seemed to agree that this was the way to move forward. "By reworking the PSHE syllabus, more focused training and assessment can be developed, and individuals would have an opportunity to learn about the implications of their decisions," he said in December 2011's financial education debate.

Also bought up in that debate was adding personal finance to maths classes.

The idea, however, didn't spark perhaps because ministers had read Ofsted response to the consultation which argued that when money and maths were taught together both were damaged.

"Financial capability... is about more than numerical competence," the response said.

"It is also about developing an understanding of financial services and key ideas, the skills to apply this understanding to managing money and acquiring particular attitudes towards personal finance."

The Government's attitude, then, seems pretty set.

Financial services in schools

But if the PSHE syllabus is to be overhauled to include personal finance it still remains to be seen who'll be doing the overhauling.

Financial services companies have long been involved in large education projects: Barclays have spent £15m over three years on its Money Skills programme for schools; Natwest provides a service with personal finance resources for children and teachers, MoneySense for Schools; Santander in Schools is a programme that places employee volunteers into secondary schools; Capital One employees link up with Nottinghamshire schools; the list goes on.

Even Personal Finance Education Group money education projects which provide the blueprint for widespread smaller personal finance classes have received funding from - among others - Barclays, HSBC, Aviva and Citigroup.

Although the charity is not affiliated with those companies and doesn't sell financial products, such close involvement should surely raise some eyebrows among bank battlers like Moneysavingexpert.

Or perhaps that's a little cynical. As Graeme Hughes, Nationwide's Group Director for HR and Corporate Affairs has said, "understanding concepts such as saving, managing money and the impact of debt means [children] will be more confident about their finances as they get older and we hope less likely to have money worries."

Who could argue with that?


18 April 2012
Annie Chisambo

There is currently good isolated personal finance work being carried out in schools. I believe the way forward is to empower and support the teachers to develop a progressive scheme of work that will benefit children from Early Years to Year 11.

The advantage will be that kids will benefit from a well rounded financial education, the teachers will benefit from lesson plans they can use each year, Ofsted will give the school a favourable report - everybody wins!!

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