Financial Education: teaching the importance of money management in schools
From September, 2014 financial education will be part of the national curriculum. With over 1 million UK households in a debt management plan or an Individual Voluntary Arrangement, financial education in schools means a giant leap for money management and the future generation’s financial literacy.
The Government announced the addition to the national curriculum following the efforts of financial education campaigners.
The Personal Finance Education Group (Pfeg) said:
“Financial education is essential in equipping young people with the knowledge, skills and confidence they need to be able to manage their money well.
“With financial mathematics included as a part of maths and financial capability included in citizenship education for the first time, the campaign has achieved both of its objectives. We are delighted that ministers have listened on both fronts.”
Over 118,000 people signed a petition, led by Martin Lewis, founder of MoneySavingExpert.com, who noted:
“This isn’t the end of the campaign, though. It’s just the end of the first step.
“There are still around 50% of schools which don’t follow the curriculum. Now it’s important that parents, teachers and pupils in those schools speak to headteachers about why this is so important, and should be taught in their school.”
What will it involve?
For children returning to school in the autumn term, financial education will be compulsory. The subject will be taught as ‘financial numeracy’ as part of maths and ‘attitudes to money and debt’ as part of citizenship.
The curriculum will see children aged 11-14, in Key Stage 3 learning “the functions and uses of money, the importance of personal budgeting, money management and a range of financial products and services.” Pupils aged 14-16 in Key Stage 4 will learn about “wages, taxes, credit, debt, financial risk and a range of more sophisticated financial products and services.”
A need for change in financial literacy in the UK
As Chief Operating Officer of one of the UK’s leading financial solutions companies, Harrington Brooks, Terry Sweeney offered insight on the evolution of financial understanding and education:
“Up until the mid-1960s there was no such thing as a credit card in the UK, and a substantial part of the population had no bank account. Even in the early 1980s most people got paid weekly in cash and there was very little unsecured debt. when you bought something there was no credit, so you paid by cash or cheque. So budgeting and financial management were fairly straightforward – you could spend until you ran out of cash. If you wanted to know how much cash you had left then you simply checked your wallet or purse – oh, and then checked your emergency stash under the mattress.
“Changes have been incredibly rapid and bewildering over the past 30 years or so – the range of different ways to pay, and the range of different forms of borrowing have never existed before. What is more, you often don’t even need to ask for credit – it is offered to you regardless – and often with a sneaky introduction teaser rate.
“It’s no surprise then that people end up in a mess – if you don’t keep records carefully then it’s virtually impossible not to end up in a mess! Financial education is therefore critical for the following reasons:
1. to ensure that you understand all of the available methods of payment and types of borrowing – and their pitfalls and risks
2. to provide you with a basic understanding of how to budget
3. to impress upon you the importance of keeping records to help you to stay in control of your finances
4. to help you to understand the misery created when you lose control
5. to provide guidance as to how you can regain control.
“Older people often wonder why the younger generation ended up with so many financial problems. The answer is simply because they could – previous generations would have been exactly the same, had the same products and temptations been available to them!”
What does financial education in schools mean for future generations?
Financial capability is the ability to manage one’s own finances and to become an informed consumer of financial services. This must begin with an understanding and competence for applying knowledge to everyday financial issues. Learning such fundamental lessons and values as early as school has been received as a giant step towards breaking the vicious cycle of financial illiteracy in the UK.
Prime Minister, David Cameron, said:
“It’s really important, this. It’s in the citizenship curriculum, which starts from age 11.
“We have so many people in our country who struggle with how to understand how mortgage rates and interest rates and those sorts of things work, so it’s there, and I think that’s a good thing.”
Sharing the belief of Harrington Brooks, years before the new curriculum reached debate in parliament, HM Treasury, 2007 stated:
“Financial understanding is a key life skill. Children need to understand the value of money and how to interact with financial service providers to provide for their own futures. The skills they will learn in class, combined with the experience of having their own savings product, will better equip them to avoid financial problems in later life.”