The move comes after two years of intensive campaigning by MPs and peers in the all-party parliamentary group on financial education for young people, national charity the Personal Finance Education Group and Martin Lewis of MoneySavingExpert.com.
The cause also had the backing of teachers, parents, young people and supporters across the financial services industry. The new curriculum will come into force in September 2014 for all maintained secondary schools in England.
Since February we have been working closely with the department for education as the detail of the new curriculum has been refined. From our 13 years of experience of supporting teachers on the ground, we know what works. Pleasingly the government has incorporated many of our suggestions into its revised programmes of study, resulting in an improved curriculum that is of even greater benefit for young people.
So what will these changes look like and how far will they go in addressing the challenge of improving financial capability in the UK?
Pounds and pence have long been used in the classroom but in large part this has been to teach children about arithmetic, not about money. The new secondary curriculum for mathematics at key stage three (years seven, eight and nine) includes ‘financial mathematics’ with basic financial calculations and simple interest taught to 11 to 14 year olds.
At key stage four (years 10 and 11), pupils should increasingly understand the world of finance and apply their mathematic skills in this context, including more complex tasks such as calculating compound interest.
However as important as financial mathematics is it is only one side of the financial education coin. As advisers know only too well, financial decisions rarely have right or wrong answers and learning how to make sound financial decisions is critical, which is why we are pleased that personal finance will now also be taught in citizenship education for the first time.
Citizenship education is a statutory subject for 11 to 16 year olds with the aim to prepare pupils to take their place in society as responsible citizens. Thanks to the changes announced this year, this will include the teaching of skills and knowledge to manage their money well and make sound financial decisions.
It is in these citizenship lessons that young people will be taught the second, extremely important, aspect of financial education relating to money management and financial decision-making. This teaching will complement the numerical skills they will be taught in mathematics.
Budgeting
Pupils in years seven, eight and nine will learn about the functions and uses of money, the importance of budgeting and how to manage risk. The ability to set and stick to a budget is a skill that a worrying number of young people lack, and teaching it at this age will make a significant difference. Helping young people to understand how to weigh up risk and reward is another crucial area that we have successfully persuaded the department for education to include. As members of the adviser community know better than most, this is a core skill that underpins the vast majority of the financial decisions that need to be made in life.
Between the ages of 14 and 16, citizenship lessons will now feature several additional areas of learning, including income and expenditure, insurance, savings and pensions. The importance of protecting yourself from the unexpected and saving for the future will be a key area and something that will be particularly important in the new age of auto-enrolment. These new topics join credit, debt and a range of financial products and services in the revised curriculum published last month.
A question I am often asked, particularly by financial advisers, is exactly which products and services would we like to see taught in the classroom? The answer is none – at least, no specific products or services. We have to ensure that financial education gives young people the underlying skills, knowledge and confidence they need to manage their money well. It cannot be about teaching them the advantages and disadvantages of particular bank accounts, loans or other specifics that could well be out of date before they need to use them.
It is absolutely right that the new curriculum will focus on the fundamental knowledge and skills needed to choose between and use financial products and services throughout their lives, rather than the specifics that apply in 2013. Unfortunately it is these fundamentals that too many young people are entering adult life without. A survey this year in schools of more than 1.3m young people uncovered some dangerous gaps in the underlying financial knowledge of 14 to 25 year olds.
The inclusion of personal finance in mathematics and citizenship lessons in maintained secondary schools will help millions of young people to make their way in the world of personal finance. In time the impact on financial capability in the UK will be significant. There is no doubt in my mind that come September 2014 we will be a considerable step closer to our vision of a society in which all school-leavers have the skills, knowledge and confidence to manage their money.
We are not there yet, however. This is only the first step in our wider campaign for financial education to be taught in every school in the UK. We need to extend the benefits that young people in the maintained sector will receive to their peers in all academies and free schools which are not bound to follow the national curriculum. Crucially, we know from our work on the ground that to be most effective, financial education has to start from a young age so we also need to secure a place in primary schools as well as at secondary level.
When we see personal finance taught in every primary school and every secondary school in the UK, we might dare to think that our vision will become a reality.
Tracey Bleakley is chief executive of Personal Finance Education Group
Key points
- The government has agreed to include personal finance in secondary school lessons for the first time.
- Lessons will cover money management and financial decision-making.
- It is hoped the lessons will be extended to all academies and free schools.
Survey results of 1898 14 to 25 year olds
- Bank statements: 42 per cent did not know the difference between being in credit and overdrawn on a bank account statement.
- Misunderstanding interest rates: 28 per cent did not know that a lower APR was more attractive than a higher one when taking out credit
- Key financial terms: 36 per cent did not know the correct meaning of APR in relation to interest charges on loans or credit cards
- Overdrafts: 13 per cent did not know what an overdraft is, and eight percent thought it was a low-cost one-off loan from a bank
Source: Personal Finance Education Group
