From the basics of choosing a lucrative bank account to playing the stock market, knowing how to manage your purse strings wisely is an essential life skill for any young person.
In the UK, the education secretary, Michael Gove has added personal budgeting and money management to the secondary schools curriculum from September 2014. The education secretary’s draft national curriculum states that pupils should have “ the skills and knowledge to manage their money well and make sound financial decisions”. But, what do students need to know? And why?
Andy Thornton, chief executive of the Citizenship Foundation, a UK charity aimed at developing young people’s citizenship skills
The last few years have provided a stark reminder of how the fortunes of public finance can have a direct and devastating impact on people’s lives, including their personal financial situations. It underlines how personal finance education is not enough by itself. It needs to be complemented by education about the wider realm of public finance and the economy.
As well as learning about choosing financial products and services, young people need to develop the knowledge and understanding to answer wider questions. For example, What happens to the money we entrust to banks? How come we hear so many stories about bankers’ bonuses yet struggle to get a decent pension ourselves? Armed with the knowledge and understanding about how and why these things happen gives young people the power to make decisions about financial matters, both personal and public. It also helps them to understand how personal and public finance are inexplicably intertwined, and how the actions of individuals impact on others. In this way, young people become capable of working with others to change things for the better.
Ben Miskell, citizenship teacher at Bradfield School, Sheffield
In times like these we teachers have a tough job making sense of the financial crisis for students in our classrooms. [Offical resources can help, but as a child I remember the school bank of old, with a branch next to the head’s office, operated by students. It was a place where we deposited our pocket money and learnt important life skills in money management in the process.
Without it, it’s our job as teachers to make sure young people enter adulthood with the resilience to keep their heads above the murky waters of the financial world. Money saving expert Martin Lewis has an excellent free downloadable book on this, as well as teacher activity sheets that are very useful in lessons.
Even with many excellent resources available, it can still be a problem explaining key financial issues to students. In difficult economic times, we have to cover the important basics of different types of lending; mortgages and credit cards. As an antidote to legal loan sharks, teachers need to make links with their local credit unions, inviting them into the classroom and using their materials as tools. A good example of this type of socially responsible saving and lending is my own credit union here in Sheffield.
Justin Tomlinson, chair of the All Party Parliamentary Group for Financial Education for Young People
The maths is the easy bit, applying calculations that students are already making to the financial world. For example, calculating 10% of 100 is the same as asking about borrowing 100 at a rate of 10%. I think that it is less about what topics are covered per se and more about the skills that young people learn. For me, the main purpose of financial education is to equip people with the skills they need to navigate the increasingly complex financial world in which we live. That means skills like being able to compare phone tariffs and pick the deal best suited to their own needs, knowing when to borrow money and when to save, and also being savvy enough to spot scams. These skills are important. It is about being able to identify and weigh up the inevitable trade offs, be it in personal or public finances. It is about making that informed decision. Also crucial is the skill of haggling and having the financial confidence to negotiate, be it a package of driving lessons, a phone upgrade or student rent. This is where personal finance skills are the foundations of a whole lot more, including the next generation of young entrepreneurs.
Pete Pattison, teacher and former national lead in citizenship education
Personal finance education is an important part of a child’s education, but it is just that - personal. Citizenship education is about the public and the political.
For example, personal finance education helps students to find the best bank account whereas citizenship education helps them understand the role of banks in the financial collapse. Personal finance education helps students manage their own money, while citizenship education helps students decide how well the chancellor is managing their money and, crucially, what they can do about it if they do not agree with his decisions.
It was the citizenship skill of campaigning which secured the place of personal finance education in the new curriculum. It would be a mistake if the teaching of these citizenship skills was sidelined to make way for personal finance skills.
However, anything which is in the personal finance curriculum has to be relevant to students’ lives today, so it makes more sense to teach students about tuition fees than mortgages. It should give them the skills to spot good financial deals (and bad ones), and it should have an ethical dimension. We’ve all felt the cost of unethical financial management and students need to think how their personal financial decisions affect others.
Whatever is taught in the personal finance curriculum, it must be learning that is real, rather than contrived. A good example of this is a project which lends students 10 and challenges them to start a real business. This type of real learning is motivating, challenging and builds enterprise skills.
Guy Rigden, expansion director at finance education charity MyBnk
We believe financial education should be kept simple. We do not see the need to stray into other financial products and services. The aim should be that pupils should be able to understand currency, value and the security features of money, the difference between needs and wants and how to budget and why to save, as well as the main functions of high street banks, what interest is and the difference between a savings and current account.
We build on this with pupils being able to identify the role of money in society, including the deductions made from salaries and how such money is spent, the choices they need to make, how to prioritise and budget spending choices, the flow of money in the banking system, different payment types and how to use them, as well as different accounts to suit different circumstances.
MyBnk would have liked to see emphasis on the importance of behavioural change in a young person’s relationship with money by facilitating access to saving accounts and creating a culture of saving from a young age. We think of financial education as a continuum, recognising real issues faced at different life stages from direct experience a first job, going to college or university.
Tracey Bleakley, chief executive of financial education charity pfeg
School leavers are faced with a whole range of financial questions as they enter adult life. How do I set a budget? What kind of insurance do I need? Where can I turn if I am struggling to make ends meet? All of these questions and more can be overwhelming if young people are not properly prepared. The relationship between personal and public finance is a key area that every young person should understand, like tax, public spending and the personal financial consequences of wider changes in the economy.
Guardian News and Media 2013