Call to Arms! Campaign to Introduce Compulsory Personal Finance Education in Schools
THE PROBLEM …
Did you know about and fully understand compound interest at age 16? Or the difference between an ISA and a Regular Savings Account?
I’d wager probably not.
Even if you did, you probably didn’t learn it at school.
The United Kingdom and most other developed countries across the world urgently need compulsory personal finance education at primary and secondary levels. Right now students leave the family unit to enter further or university education – or the even more daunting world of work – with only the vaguest hint of how to manage their money, wages, taxes and bills.
The little that is taught is about the math and not about the personal responsibility, the benefits of being financially astute and the dangers of not. It does not present the knowledge in a fun and ‘wow’ style; it’s just all about the numbers in the maths lesson.
It doesn’t explain what happens when you enter into a contract, or the dangers of high APR’s for having the latest MacBook Pro on credit rather than saving up for it. It doesn’t care about what happens when you over-extend yourself and end up spending more than you earn.
THAT URGENTLY NEEDS TO CHANGE
Rob from The Self Employed Investor and I want children to learn the value of compound interest in a “hey, that’s cool!” way, and not just as a series of numbers in a workbook.
We want to show the dangers of mis-managed debt and debt in general. We want to be able to teach how personal budgeting can keep everything together and how astute financial planning can take care of them when things go wrong.
Martin at Money Saving Expert tried very hard last year to get this through UK Parliament but was met difficulties at almost every step. He didn’t get to make the changes we all so commonly want and the country so desperately needs.
Did Martin struggle because the economic model requires endless growth and requires a certain percentage of people to be in debt to function. To spend more than they earn. To live paycheck to paycheck, and on credit. To fuel the credit industry; the debt recovery industry; and the banking sector.
The petition he created (now closed) on the government website reached 118,848 signatures and elicited the following response:
“Schools already use Personal, Social, Health and Economic (PSHE) education as a framework within which to teach young people about personal financial management. The existing PSHE programmes of study include elements aimed at ensuring that by the time they leave school, pupils should be able to manage their money, understand and explain financial risk and reward, and identify how finance will play an important part in their lives and in achieving their aspirations. We are currently carrying out a review to determine how best to support schools to improve the quality of all PSHE teaching.”
This response does not go far enough. At best they have committed to ‘carrying out a review’. What the system requires is a commitment to fundamentally change the current system and introduce specific personal finance modules at both levels of primary and secondary education. Children should know how to manage their money, but it is obvious they do not.
Leaving the beginnings of personal finance to later stages of secondary schooling is too late.
As I wrote in this week’s Monday Madness, Canada along with Marvel and Visa are putting together lesson plans using superheroes. While this may well appeal and capture initial interest among primary level children (5-10 yrs, for overseas readers), even just including basic details of compound interest at this level could spark a life-time of money-management ability:
If you can show a 10 year old how they can turn £20 a month into £56,124 by the time they’re 65 by only having to save and not spend £13,210 of their own money, I think that’d grab a lot of attention.
STUDENTS ALSO WANT THIS CHANGE
Just yesterday (Thursday May 3rd, 2012) the BBC reported students see the current math system as flawed and irrelevant. One student spoken to by the BBC said “Show me how I can use maths in business, to do accounts or banking”, and 63% of those surveyed by City and Guilds were worried about money.
Chris Jones of City & Guilds said: “We are not saying maths should be dumbed down, but it needs to be more relevant to the real world.”
HELP SPREAD THE WORD!
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LOBBYING
I have written to my MP, and the education secretary, and my local media. If you have the time to do so and agree with what Rob and I are saying, please consider doing the same.
We won’t get there without your support so please, please do all you can to raise awareness that the current education system is effectively failing our children when it comes to all matters personal finance.
With enough pressure and support, the United Kingdom and the rest of the world can have relevant, useful, real-world personal finance knowledge taught where it matters most.
& Rob
Tags: Education, Personal Social and Health Education
Category Education Campaign
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“Schools already use Personal, Social, Health and Economic (PSHE) education as a framework within which to teach young people about personal financial management. The existing PSHE programmes of study include elements aimed at ensuring that by the time they leave school, pupils should be able to manage their money, understand and explain financial risk and reward, and identify how finance will play an important part in their lives and in achieving their aspirations.”
I must have schooled in another country, because these lessons sure didn’t do anything like that and I didn’t leave school all that long ago. I’m supposed to have been trained up to be able to set up a small business as part of my overall University course and I quiver like a harp string when faced with tax forms, mostly I know there’s probably some form I should have filled out but didn’t know I should be filling out, so although I do my best I hate to think what its like for self-employed people facing a mass of such forms straight out of school. People who become a self-employed builder will need to fill in a wild amount of forms without a clue what they all mean. They will also be wildly unprepared for such a position, when preparation should be a pretty easy thing to achieve.
Personal Finance would have to be a distinct subject and if they did create it as one they might even get me as a joint Maths and Personal Finance teacher. It is just as important as something like English and it will define our aspirations for our entire life.
Same here, Rob. That course didn’t exist when I was at school, but having spoken to some high school students I’m friends with through work, they state essentially it teaches them absolutely nothing of value.
I said “if there was a class that taught you about being a ‘financial adult’, would it interest you? We’d teach you about contracts, interest rates, how to get free money from banks (compounding), taxes and so on” the 3 I had with me were literally saying “where do I sign up for this course???”
I couldn’t agree more. Kids, students (hell even us young adults) are woefully unprepared when it comes to making financial decisions. Jargon terms make finance feel impenetrable – as though its full of complex concepts only comprehensible to financial experts.
We’d do well to educate kids about finance management and (as much as I hate this term) fiscal responsibility, if only to avoid inciting the dangerous attitudes towards credit that have blighted society in the past.
Well said, Harri. I’m not trying to turn the whole education system on its head. All I want is for some form of *meaningful* education about personal finance, management and fiscal responsibility. And to start it much, much earlier than the apparently useless system that there is now.
Show a ten year old how they can create a million pounds without having a million pounds and I’m sure it’d seed a life-long at least appreciation of the mechanics of personal finance, if not a deep-rooted interest.
Nice article Lee and a very worhtwhile cause – you have my full support in raising and promoting this very important issue.
Simon
I think it is very important to relate any personal finance teaching to things that actually motivate kids and that they can easily relate to.
I’m a good 15 or 16 years out of school, but i always remember the best teachers could relate concepts to everyday, easy-to-relate-to examples.
I guess smart phones are a must-have gadget, so how do you save up for a smart phone, what happens if you get the wrong package for your needs and you cannot afford the bills?
Provided the teaching is relevant and not too abstract, then it can only be a good thing. Maybe us bloggers should have a go at writing some sample lesson plans or guides for different aspects of personal finance teaching?
Good luck with your campaign, but I’m not sure it’ll work. Schools can teach the how but not the why in this area. The why comes from your values, and IMO that’s the job of the parents to supply. Finance is crystallised power, a claim on future work, and where you switch this resource is how you exercise power – directed by your values and beliefs.
I knew how compound interest and a mortgage worked at 16. Because my mother took the time out to tell me! I understood the difference between dividends, and indeed ordinary shares and preference shares, because a teen magazine, called ‘Treasure’ I believe, described this it was a general education sort of mag which also had articles on how a crane worked and the water system among others. Again, my parents believe in educating their son about how the world worked, and this magazine was part of it, which is why we had a subs.
And no, I wasn’t born with a silver spoon in my mouth – my Dad was a maintenance fitter and my Mum a SAHM. So perhaps your campaign should extend to getting parents to shape up and start doing what humans have been doing since the STone Age – passing their knowledge and wisdom on to the next generation. Grandparents could have a input into that too. Children learn by example, and seeing adults live these values will make that stick.
We ask so much of our schools nowadays, where in previous generation we expected parents to pass on the basics of how to relate to society, and school was there to teach the children the three Rs and the skills needed to be of value to an industrial society. We haven’t added to the amount of time we are giving the schools to pass on all this extra stuff. At the rate we are adding things for schools to teach they’ll be taking the children full-time from 5 to 18!
Ermine – Lol I’m 22 and still going. You do have an important point we might not be paying enough attention to though. Parents do play a vital role, my problem is understanding what the solution would be.
The reason I’m supporting Lee with this (I’ll be taking a slightly different direction) is that schools technically speaking should be doing these things so they have the time allocated, its just woefully used. Some schools are great and some even offer Accountancy and the like at A-Levels which is fantastic (I’d certainly have done it and I loved accountancy at University). Maths at school is possibly the dullest thing you can imagine, but personally I’d wipe the whole PSE classes (duller than maths, but you can’t imagine something this dull) and rebuild it with the aim of building basic and practical life skills with the aim that kids can leave school able to fill in a tax return, understand a bank account, get a job (this they are actually quite good at) and know the basics of being self-employed (nothing more than that, but its enough). Just consult with the kids and see what they want and don’t want. Strictly speaking that’s what it is meant to do, but it doesn’t and it was the stupidest thing I’ve ever done. They have these lessons in principle, but I imagine many PSE teachers don’t have all these life-skills themselves. Then in maths I’d just want a bit more focus on practical applications with personal finance every know and then… it wouldn’t be beyond maths teachers who are generally a clever bunch, but of course its all about learning set work for exams these days; I think teachers just get de-motivated.
The one thing I do know for sure though is that these kids don’t have a clue. They probably live a far richer lifestyle than you. I’d focus at the higher end of the school with basic lessons in early secondary school when you do little else anyway, but things at A-Level like the first module I had at University which is a course to teach you how to set up a business for engineers would be ideal; it was this that got me investing and taught me in 4 hours the basics of accounts; I’d have never started investing or all this other stuff without that module.
Hi Ermine. Thanks for your comment and your visit
I totally agree that in an ideal world it should be the parents who are responsible for this. Unfortunately – by way of my day job – I’m skeptical that many parents can add up themselves, never mind understand the topic enough to pass on meaningful and values to their children.
There are exceptions. I’m not attempting to tar everyone with the same brush. There are millions of children and parents that I don’t come into contact with that I am sure do a great job of their parental responsibilities and passing along such learning.
But if everyone regardless of their parents, their background or their interest at least had a common grounding from the education system and a basic understanding of how these things work – I think that could only be a good thing?
Hi Lee,
> Show me how I can use maths in business, to do accounts or banking
At the risk of being a crabby old git again:
Several things wrong with this individual. For a start, he’s dumb. It’s pretty darned obvious. Arithmetic is a technique, a toolkit to process numerical data, be that in Tesco working out how much four pints of milk will cost or in business subtracting input costs from revenue. I recall how I was taught arithmetic in primary school, in the last years (from 8 to 11 ISTR) these were often couched in terms of little businesses, selling apples and buying them wholesale, which exercised addition, subtraction, and division (the wholesale lumps were usually only divvied up to four or five customers, so no long division). This was an attempt to make it a little more real, and to be honest also to liven up the dreary practice sessions. The perversity of the old currency system of 12d in a shilling, 20 shillings in a pound and 21 shillings in a guinea made this more challenging at times. Decimalisation happened when I was in primary school, but the school couldn’t afford to change the books.
My school was an inner city London primary school in New Cross. Why are we now letting people out of secondary school with an unawareness of how basic arithmetic (not maths – most business calculations don’t need maths at all) relates to business? Surely some basic initiative is all that is needed? What on earth has gone wrong here?
I do support your idea of trying to teach why borrowing money makes everything cost more. You don’t even have to teach values there. The extra cost of 20% credit card interest making a £100 gizmo cost £120 is easy enough to see, and you can show that having it now costs £20. Once people see the cost in that form they have a chance to push back.
However, your lad who needs people to spoon-feed him to understand how arithmetic relates to business is a lost cause IMO. If he can’t infer the particular from the general then he is just too slow to get it.
If we’re really that far in trouble in Britain now, I’d drop the idea of trying to get across compound interest
First plug the leaks – teach that credit is dear, that you end up with less Stuff in your hand for your money. It’s not the making of money that will be the trouble for such individuals, it’s the needless leaking away of it to the rapacious financial services industry.
I’m vaguely scared for the future of Britain that we’re having this conversation!
Hi Lee,
Just to let you know, I’ve enlisted to your call to arms!
http://gamerindebt.co.uk/ive-enlisted-campaign-to-introduce-compulsory-personal-finance-education-in-schools/
I wholeheartedly agree. It’s worrying how many people are completely clueless about the most basic financial things – my parents had to be told how an endowment mortgage worked! Too late when they had already taken one out! Regarding this, perhaps it’s not only children who need the education – read our blog post here http://bit.ly/JGrSBv
I agree with your comments, which is probably a good thing because I deliver financial education to schools in my region working with pupils from nursery through to 18 years of age. I am employed by our local council in Scotland as a financial education officer and have designed programmes dealing with interest/debit & credit cards/borrowing among other things which all link to the money parts of the curriculum for excellence we use in scottish schools. Personally I do not believe that teachers have the time or background knowledge to deliver personal financial issues to children, but the information provided needs to be unbiased and without agenda, so financial institutions also struggle.
This is a brilliant post and one that I would like to link back to from my blog as I have a few things I’d like to say on the subject. I remember hating maths at school and being excluded from business studies because i was deemed to not be one of the top achievers in class.
I have discovered a long time ago what secondary “business” studies is about, and it’s got little to do with financial principles. The book “The Richest Man in Babylon” is ideal study text for secondary education because it is not dull material.