CompaniesOct 24 2013

Lessons in finance too little, too late

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Financial education has been compulsory in schools in Scotland and Wales since 2008.

You may think therefore, the government has finally recognised that it is more important than ever that young people have the knowledge and skills required to make sound financial decisions.

However, given the importance the government has placed on the provision of financial education, the approach they have adopted is all the more puzzling.

Despite a plethora of evidence pointing to more effective strategies, stakeholder submissions advising against cross-curricular delivery and campaigning by financial education organisations, the government has chosen to proceed with this myopic citizenship/maths approach.

Disappointingly, the wider industry and previous contributors to this column have been quick to hail the new curriculum as a victory, without questioning its effectiveness or giving any serious consideration to the implications. The mentality is simply “job done”.

It is our concern that the new curriculum will not and cannot deliver financially capable young people. The proposals have the hallmarks of yet another box-ticking exercise by policymakers, anxious to be doing something, but without knowing quite what.

The immediate flaws are as clear as they are large; notwithstanding the obvious fact that most schools these days operate as academies and are not obliged to follow the national curriculum, the point has been missed that financial capability is foremost about behavioural concepts.

Teaching the arithmetic behind things like compound interest is of no benefit if the underlying concept is not contextualised. Put simply, there is no evidence to suggest that acquiring mathematical skills will transfer into capable financial management.

Similarly, while the purpose of Citizenship is supposedly to provide this context, insurmountable obstacles remain. In an already overcrowded subject, how many hours will be dedicated to the teaching of personal finance? Who will be responsible for delivering it and how qualified will they be with a complex subject matter?

A couple of hours a term of lesson time, with a few sessions of training for teachers, will simply not be sufficient.

Other issues are at play here too. Citizenship is no longer inspected by Ofsted, nor is it included within performance league tables.

What chance is there of financial education in Citizenship being effective, when there is no compulsion to examine it? How can anyone, let alone the Department for Education, gauge its effectiveness when learning, understanding and application are not measured?

So what is the solution? In July this year I was appointed as the new vice-principal at the ifs School of Finance and head of its financial capability and schools programmes.

Having spent many years in the financial services industry prior to my current role, I have witnessed first hand the debilitating effects of poor financial skills among adults.

What struck me was that the blame is usually focused on the advice given, but the issue of ‘caveat emptor’ – let the buyer beware – was rarely addressed. The consumer has the responsibility to look after themselves, but how can they if they are not taught?

My views were reinforced from the invaluable experience I gained as a teacher, delivering financial education lessons to 14-19 year olds. What soon became apparent is that the most effective way of changing behaviour and encouraging positive financial practices is through rigorous programmes of accredited study.

Understanding how to manage money, knowing the pitfalls of debt, the ability to make provision for a financially secure future and retirement, can make a huge difference to young people’s aspirations for their futures. Seeing young people engage with their studies where they have previously been disinterested made my time in the classroom hugely rewarding, and was only brought around when they were sufficiently challenged and their hard work recognised.

Young people are aware they need to be able to manage their finances and are desperately keen to learn. Yet it was only when they took part in accredited programmes of study that they were able to analyse and change their behaviour.

Consequently, former students of mine have gone on to study at university with the skills to manage their finances. Others are now forging successful careers in financial services.

The most effective way of delivering financial capability is through qualifications underpinned by independent assessment. At the heart of financial qualifications, remain three core principles. Financial education must be:

* Age appropriate – financial education is effective when young people are experiencing the transition towards greater independence and adulthood, rather than at younger ages.

* Given sufficient time within the curriculum – if financial capability is about changing behaviour, many hours of study are required. A couple of hours a term through Citizenship will not be sufficient to effect any real change.

* Independently assessed – having examinable qualifications determines how effective teaching and learning has been, and the current proposals allow no room to gauge the effectiveness of its approach.

There is a wealth of evidence which supports the efficacy behind this thinking. Ofsted, for instance, stated “accredited courses that lead to a formal education inspired a more coherent curriculum and sharper focus on the learning outcomes students were expected to achieve”.

Meanwhile a report from the University of Manchester entitled Becoming Financially Capable suggests students who undertake accredited programmes of study have a greater knowledge and awareness of financial products and planning, and are more confident when it comes to their own personal finances and putting these skills into practice.

Indeed many students have gone on to manage their parents’ financial affairs, including mortgages and pensions.

We are at a critical stage in the delivery of financial education in schools and it is clear that much needs to be done. The world is changing and our students, now more than ever, require the knowledge and skills to make complex financial decisions.

It is vital that policymakers and educators do not run the risk of complacency by thinking that financial education has been solved by including it as a bit-part in Citizenship along with some basic arithmetic.

The ifs School of Finance remains deeply concerned that the new curriculum will be little more than a box-ticking exercise that will create good headlines, but little else. Financial education is too important for that to happen and a more effective approach is urgently required.

Alison Pask is vice-principal of the ifs University College

Key Points

* From next September, schools in UK will be required to deliver lessons in personal financial education

* It is the concern of the ifs School of Finance that the new curriculum will not and cannot deliver financially capable young people

* We are at a critical stage in the delivery of financial education in schools and it is clear that much needs to be done