Building a financial education

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Building a financial education

For adviser Bev Stoves, it all started when her sons were much younger and she asked them how much they thought a house, car, the council tax or the water rates cost and they did not know. 

Her sons are now aged 17 and 12 and have a better idea about how much household and financial products cost.

Ms Stoves, managing director at Investment Sense, says: “I only ever talk about finances for a few minutes here and there, but my boys understand the concept of mortgages, tax, savings, inflation, investment risk and life insurance. My eldest son is doing economics at A-Level, and he recently came home and demanded to know if I knew about the 40 per cent tax rate. He was incensed.”

This is why she is so passionate about young people receiving financial education. It has also now spurred her on to volunteer as a trainer for the Personal Finance Society Education Champions initiative, which is to be launched in September to address the problem of financial illiteracy in young people.

It is also in response to the 2017 FCA Financial Lives survey, which said a lack of understanding about budgeting, saving and investing had contributed to 4.1m people failing to pay bills or credit commitments. Some 3.5m are also borrowing from friends and family to make ends meet, while just over a third (35 per cent) of those aged 45-54 have prepared for retirement.

As the Education Champions scheme is rolled out across the country, advisers will volunteer to work in secondary schools and further education colleges.

In the three weeks since the scheme was launched, 350 advisers have signed up to volunteer as trainers.

 

Key points

The PFS is launching a financial education initiative in September

It is hoped it might build more financial awareness among school children

It could help attract financial planners to the industry in the future

 

Using the PFS’s existing Discover Fortunes schools initiative, with help from advisers young people will be put into teams and role play as financial planners, competing to come up with the best advice in different scenarios.

The sessions will take place as standalone classes, typically during a free period. 

Over a 90-minute period the teams plan five different client portfolios. They do this by first watching animations where the client characters introduce themselves. Teams then review further client information and assess their client’s risk profile before agreeing on the portfolio plan.

Keith Richards, chief executive at PFS, says: “Originally launched in 2012, members of the PFS team have delivered it more than 150 times at schools, colleges and universities across the UK, with more than 80 per cent of students expressing an interest in working in the financial planning sector after playing the game.

“Now that the scheme has been rolled out to our 37,000 members, we would like to see its reach extended right across the country’s network of secondary schools and colleges of further education.”

More needs to be done

In September 2014, financial education became part of the secondary school curriculum in England, but it has not been as effective as it should be, The Money Charity says.

In Spring 2016, the All Party Parliamentary Group on Financial Education for Young People said more needed to be done to strengthen the provision of financial education.

A subsequent survey by The Money Charity found while most schools deliver some finance education, teachers have little faith in its quality and were held back by insufficient time, negligible resources and school leaderships that do not view it as a high priority.

Additionally, teachers have been calling for a mixed model of provision that includes direct delivery by experts from outside schools.

Brokers who volunteer for the PFS initiative will attend a regional training session in the second half of this year, where they will be trained on how to make contact with a school, how to deliver the session and next steps students can take.

The cost of training and the provision of support materials, which has been in the pipeline since the end of last year, will be covered by the PFS.

The PFS has been liaising with HM Treasury, the FCA and the Money Advice Service (MAS), which is leading the government’s drive to improve financial competence.

Ged Dixon, director at Morlaix Financial Planning, says as well as wanting to help young people find out more about finance, he also believes the scheme will attract new advisers to an ageing sector.

Mr Dixon says: “There is going to a be a shortage of financial planners in the not-too-distant future. The average age of an IFA is about 58, so if we do not get any new blood coming through there’s going to be potential advice gaps.”

He has already run a session at a school with 40 students where he said the children interacted and asked many questions.

In response to news of the PFS’s initiative, Mel Kenny, a chartered financial planner at Radcliffe and Newlands, says he wants to get “a feel for how good or bad things are with young people and their attitude to money”.

Ms Stoves adds: “It’s so important that young adults understand that when they start work and earn £30,000 a year, they don’t keep £30,000. They also need to know that when they rent their first flat for £750 per month, there are lots of other extras to be budgeted for and funded.”

Ms Stoves has been an adviser for 24 years, having set up her own IFA business back in 2010. 

Her day-to-day role at Investment Sense involves advising clients on all aspects of their finances but much of the work she does is around retirement planning.

Another key driver behind her volunteering is a desire to see more female students join the profession.

Ms Stoves says: “Given financial services is still such a male dominated industry, I would love girls to be inspired and think, ‘I could do that job’.

“Finances can be perceived as boring. Young people know how much the latest iPhone costs but they don’t know how much the weekly grocery shop or summer holiday to Majorca costs. It’s not their fault as it’s unlikely anyone has ever told them.

“If the time I spend with pupils makes just one student budget and deposit some of their pocket money or earned money into a savings account and think about their financial future or stop and think before they sign on the dotted line for a credit card, or never have to take out a payday loan, I will be very, very happy.”

Part of the curriculum

For the scheme to achieve its objectives advisers have also stressed that the initiative needs to become a permanent part of the school curriculum.

Mr Dixon says: “It should be embedded in the curriculum. We had problems in 2008 with the credit crunch because [people] were just going and putting thousands of pounds on credit cards without knowing the implications of how they would pay for it.

“Post baby boom, there’s going to be lots of young people who receive an inheritance. If they have a few thousand pounds arriving in their bank accounts we need to be safe in the knowledge they will do something sensible with it.”

The PFS has said the initiative has no closing date and the hope is it will become a key part of the national curriculum.

Mr Richards adds the scheme will “raise the profile of a career in personal finance to rank alongside other professionals, such as accountants and solicitors, and also instil some vital financial awareness in today’s younger generation.”

Ima Jackson-Obot is a features writer at Financial Adviser