If you want children to understand a subject, the obvious approach is to educate them on it.
More than 80 per cent of students are calling for greater financial education in schools, according to recent research, but industry experts say this will not be enough for younger generations to grasp the essentials of personal finance.
The research, released last month, was part of the London Institute of Banking and Finance’s Young Persons’ Money Index.
The government could help by being really clear that financial education is vitally important LIBF spokespersonThe research found that despite the introduction of financial education to the UK’s national curriculum in 2014, just 8 per cent of young people said the money skills they learnt could be attributed to formal education.
So why do students still want more financial education five years after its introduction onto the national curriculum?
Standalone subject?
Research conducted by the Money and Pensions Service in November 2018 shows that financial education is most commonly integrated into existing subject lessons, with 96 per cent of schools or colleges surveyed doing so.
Indeed, only 31 per cent of schools or colleges teach financial education as a separate subject.
A spokesperson for LIBF says: “The government could help by being really clear that financial education is vitally important. Including it in the formal frameworks and giving clear guidance for schools on what they need to cover, and how, would help.”
Geoff Barton, general secretary of the Association of School and College Leaders, says: “Financial education is part of the national curriculum in maths and citizenship, as well as part of the programmes of study taught in personal, social, health and economic education.”
He says while the LIBF’s research suggests that more children want it to be taught as a standalone subject, “this raises the question of what other topics should be removed from the curriculum in order to make space for more financial education”.
Both the Conservative and Labour parties were contacted for comment on how they would approach financial education should they win the impending general election, but neither responded to requests for comment.
A spokesperson for the LIBF says: “We work with hundreds of schools around the country who teach financial education as a standalone subject, and they tell us that the impact of that is really powerful – it really does change lives for the better, not only building knowledge, but changing attitudes and behaviours for the better.
“But, however it is delivered, we need a clear syllabus, dedicated lesson time and for the impact to be formally measured.”
A spokesman for the Department for Education says: “We made financial literacy compulsory for 11 to 16-year-olds within the national curriculum for citizenship to ensure that children growing up gain the essential skills in managing money.
“To further this, we are working with HM Treasury and Maps to consider how we can better support the teaching of financial education in schools.”
Collective approach
A spokesperson for Maps highlights the importance of a “collective” approach, which means financial education, coupled with other mechanisms such as learning about finances at home, is needed.
“We believe financial education is essential to ensure all children and young people are well-prepared to make the most of their money, now and when they enter adulthood.”
Key Points
- Young people are saying they want more education on personal finance
- Some say teaching young people to budget is more important than formal education in personal finance
- Personal finance education is more effective when it is relatable
The spokesperson adds: “Evidence suggests a collective approach is needed to improve financial education, as children and young people will require several different touchpoints to learn about money at school, in the home and in the community.”
Kay Ingram, director of policy at LEBC Group, echoes the view that families have an integral part to play in teaching their children good money habits.
She says: “From next September, the first group of 18-year-olds will be getting the proceeds of their child trust funds. They were made aware of this at 16 and can control the money themselves from 18.
“Parents should start talking to their children about how they will use the money. Teachers could also use this as a practical way of introducing 16 and 17-year-olds to money matters.”
Budgeting
Some in the industry point out that teaching children how to budget is potentially more important than formal education in the subject itself.
Ms Ingram says: “One of the best ways to engage this age group and prepare them for independent living is to get them an app which enables day-to-daybudgeting, goal setting and instant valuations of investments and debts all in one place.”
LEBC recently developed its Hummingbird app, which helps clients stay in control of their money.
Alistair Cunningham, chartered financial planner at Wingate Financial Planning, says there is no correlation between education and financial capability.
Mr Cunningham says financial education may lead to short-term improvements, but not long-term benefits.
He suggests regulation of financial markets is necessary as it only takes minutes to open a credit card but much longer to open other savings account vehicles such as pensions and Isas.
Ofsted inspection framework
While school inspection agency Ofsted does not have the power to require schools to teach specific things, it introduced a new inspection framework in September.
Financial Adviser understands the new inspection framework has a greater focus on rewarding schools that offer a broad curriculum.
Mr Barton says: “We support a general review of the curriculum to ensure that it provides young people with the skills and knowledge that they need in a fast-changing and complex society.
“Such a review would need to take into account the breadth of learning that is required and seek to establish a rich curriculum that balances all the competing demands.”
The Personal Finance Society has been developing a financial education and awareness programme for 16 to 18-year-olds.
The PFS says more than 7,500 young people engaged with the programme in its initial phase.
Keith Richards, chief executive of the PFS, says: “The programme is set to become the largest of its kind in the UK during 2020 and will address some of the findings contained in the LIBF research.”
The next phase of the programme was announced at last month’s PFS National Symposium’s Futureproof event.
But the PFS stresses that while it is important for children to engage with personal finance in an interactive way, this does not replicate the benefits of also having a qualified personal professional.
“The impact of financial education is more likely to be effective when the content is relevant to young people,” a PFS spokesperson says.
The spokesperson adds: “This is why the PFS employs elements of gamification within its workshop structure to enhance the learning experience, but those who deliver it are also a contributing factor, as there can be no substitute for a qualified personal finance professional.”
Saloni Sardana is features writer at FTAdviser and Financial Adviser
