According to the latest consultation by the department for education 11 to 14 year olds in key stage three will be learning about the functions and uses of money, the importance of personal budgeting and managing risk. In addition there will be a renewed emphasis on mathematics, including problem solving in relation to financial mathematics. Meanwhile 14 to 16 year olds in key stage four will learn about income and expenditure, credit and debt, insurance, and savings and pensions. The new programme of study for mathematics for this age group will not be released for consultation until the autumn – for implementation in September 2015 – but it is expected that there will be a greater focus on finance than there is at present.
When speaking to students about careers in financial services, it is not perhaps surprising that there is much more interest in the salaries available for looking after other peoples’ money than there is in actually looking after other peoples’ money. In other words, what the young adults are most interested in is their money. After all, apart from job satisfaction, it is undeniable that the pay packet at the end of month is what inspires a large proportion of the workforce to get up in the morning. It is a shame if the opportunities that this pay packet then represents – a holiday, a new car, a meal out, a deposit on a house – are not maximised. Equally it is important for young adults to realise that a salary of £20,000 does not correlate to a take home pay of £20,000.
Financial capability, managing personal finances and financial literacy are becoming vital and the advisory sector has a role to play.
A book has been recently published, entitled #your money, which provides a no-nonsense, comprehensive introduction to the world of money for 16 to 25 year olds as they take on responsibility for their finances for the first time.
Topics covered in the book include money habits, managing money coming in and going out, excess money, making big financial decisions and avoiding money pitfalls. Perhaps the most important of these is money habits as it is important for young people to understand why they have the attitudes towards money that they do and how they can change the way they think about money – or at least how they can manage their finances to best complement any truly unbreakable habits.
About 2000 copies of #your money have already been distributed to 16 to 18 year olds living in the financial services hub in the City and copies are also being donated to sixth form pupils at various schools and academies throughout the country.
Financial literacy can be a complex area for all age groups, not just young people. For example it was revealed in the House of Commons in late 2011 that only 36 per cent of people understand that the term APR relates to payments.
All of us know that managing personal finance effectively is also of the most pressing urgency for adults too. The government’s monitoring of payday loan firms, the growth in pawnbrokers in the high street, the attempts of families in an era of austerity to manage on a tight budget while seeking to try and save for pensions is part of the current economic environment and will be with us for the foreseeable future. Not everyone can afford to buy advice. Those of us with the privilege of professional expertise, and professional bodies that benefit from the voluntary expertise of so many practitioners in the sector, need to think carefully about how to contribute practically and usefully to this area of growing need. ‘Your country needs you’ is definitely the call for readers of Financial Adviser as we try and find ways of helping our adults and young people manage their finances better.
Ruth Martin is managing director of the Chartered Institute for Securities & Investment
Key points
* It has never been more important for young adults to know how to budget and to understand personal finance.
* What young adults are most interested in is their own money.
* All of us know that managing personal finance effectively is also of the most pressing urgency for adults too.
