Can education rescue Britain from financial illiteracy?

Great debate, though there are merits in both arguments.

Annie is right that mandatory financial education is futile against industry marketeers, posing as CSR. Vicky is right that kids need to be more aware of what is available to them.

However, when what is available is a moveable feast of packaged products and services, where the consumer cannot isolate a unit cost and determine value for money, there is not much compulsory education can do about it.

As an aside, to say German consumers are not indebted is inaccurate, Vicky - check the European Parliament April 2010 report : Household Indebtedness in the EU on p2!

It's also worth mentioning that the National Audit Office, February 2010 review: Business Innovation and Skills: Helping over indebted consumers stated: "there has been no attempt to evaluate the strategy as a whole"

So all in all, when the government hasn't the data to provide a national picture of the extent of indebtedness, all arguments are somewhat academic... But hey, that's only what we pay our taxes for ;-)

Still, bravo all round for raising the issues - can we have more again soon, please?

Hi everyone.

We need support!

Money Maths for Primary schools is alread available

Please have a look at my Blog

"As an IFA and a Mum, I am appalled at the lack of financial education in our schools. Young adults often leave the system, having little knowledge regarding, tax, debts, budgeting and financial planning. It therefore comes as little surprise that currently we have the lowest savings ratio in Europe and many people in the UK find money matters difficult.

Working with ABCurriculum together, we want to do something about this! AB Curriculum have developed an action based learning programme consisting of thirteen fun activities for primary schools, called “Money Maths”. With the kind assistance of some forward thinking teachers, all of us are working together to develop a complete secondary programme for young adults, which will be ready in the summer.

“Money Maths” runs alongside ABC’s other “Live and Learn” programmes on enterprise, community, health, the environment and the Olympics. All are on display in the National STEM Centre

The problem is, budgets have now been slashed for learning materials and schools cannot afford to purchase these resources, even though they are desperately needed. We are therefore sending out an SOS to companies and in particular the financial services sector, to assist in this initiative and perhaps help restore the public’s trust in this industry.

This is a chance for all businesses throughout the UK, large and small, to get involved and engage with their local schools and community, so that the next generation, will have the opportunity to leave the education system better prepared and more financially educated to deal with adult life

I'd love to speak to Vickie & Annie to tell them what's happening!

My Blog is http://financialadvicecumbria.blogspot.com

All about the Leaky Bucket, Money Maths & Figure it out.

I'm sending Vickie an email.

I can tell you that many many Teachers, IFA firms & fund managers are right behind supporting SOS because they sense in educating the public about personal finance & money matters.

As one said to me.. "Education is the Silver Bullet!"

I am also talking to Whitehall, because we need the APPG & Dept of education to get behind

It's become clear that many teachers will need training & assistance to teach The leaky Bucket & this subject in school & we are assembling a team of IFAs & professionals to assist with this Nationally. However we are determinded to make the course simple, fun & interactive so that students leave school better prepared for the world outside.

Everyone is really really excited because we all passionately beleive in what we're trying to to acheive.!!

Unfortunately Julie Bailey you are exactly the vested interest driving up this issue. More unfortunately, we have an even bigger problem which is far more pressing and fundamental than FE and that is basic education in schools which has been steadily eroded by fashionable and social engineering topics and that is why we have the FE problems.

If children were taught the 3 Rs properly then there would be know need for Financial Education. Monetary examples were always and can always be used to illustrate the mathmatical principles involved and learning details about financial products which could well have left the marketplace is a total waste of time.

As it is too many children are illiterate and innumerate and FE as a separate subect would be a further waste of valuable school time. Parents HAVE a responsibility and are abrogating it in too many cases. People like Julie see it as a money maker.

Speaking with my educational hat on, Patrick, (ten years in the classroom before founding Zero-credit) it is less the subjects taught than the syllabus, used to deliver them.

For instance GCSE Media Studies, which encompasses little more than a review of Terminator 2, is I think what you are driving at. But examples such as this are from schools trying to drive themselves up the league tables. Media Studies can be well taught and cover exceedingly broad and challenging content. Regrettably I have seen both ends of the spectrum.

Other things to watch out for from schools which play their A*-Cs are BTechs providing 2 - 4 GCSE "equivalents" and ALAN (Adult literacy and numeracy) tests which are sat repeatedly until a GCSE "equivalent" is achieved. These are usually fed to bright kids who are totally disengaged from learning by a management which prefers recognition to helping youngsters achieve. Thankfully, my last employer was nothing of the sort!

In my experience, children do need to be taught more about the adult world, but not by those trying to sell them something, which I regret to say is all that I have witnessed from FS firms attempting to deliver FE. Suggest you have a look at MyBnk if you do not know it already!

I'm surprised the question is even being debated . Of course kids need financial education . How else will they be able to manage their lives in the big wide world when they venture into it .

Patrick if you think that then you are sadly mistaken! And you have little understanding of what decent IFAs do!

I spent Monday afternoon sorting out a recently widowed disabled ladies pension benefits getting her the best deal I can for her late husbands pension pot..she has breast cancer. I also filled in an Attendance Allowance Form with her because no one had ever told she might be entitled. Her family have to be with her almost all the time. No one has told the family they are entitled to respite care free of charge. What did I get paid for this particular time I spent with a client & talking to her family about possible long term case needs?… Nothing...but it made me feel good knowing I'd made a difference.

Teaching children about money & financial planning & how making decisions like taking up smoking/alchohol/drugs or as a teenager will impact on their pockets throughout life & basically mess up their financial plans has got to be a good thing. This course is intended to go through someone’s life & teach the basic concept of eg budgeting, managing debts, tax, NHI, benefits … the process of buying a house, the importance of making a Will etc etc.

I am doing this precisely because this is needed. Have a look at what Richard Rose Central Academy in Carlisle has achieved. Almost bottom of the Ofsted league tables 3 yrs ago. By working in partnership with local businesses & lobbying govt they have managed to build state of the art facilities designed for students and local businesses to use & share. The whole concept is designed to engage students with the local economy and what teachers are telling us is that the more students see school as teaching them life skills & relevant the more likely they are to learn! It is the most amazing place & already their results are improving. Anyone visiting the school can’t fail to be more than impressed

Those teachers are giving up their valuable time free of charge to help me write this programme so it is exactly what we all want the programme to achieve NOT what suits one particular financial firm!

Derek hits the nail right on the head for me!

The Leaky Bucket is going to make a difference, because I’m determined it will do!

If children are not taught these things at school then they will learn the ways of their parents. Are we ready to be a role model in the world of finance? (We cannot use house price inflation as an investment strategy for the next generation).

I'm with Derek. How can it possibly not be a good thing to provide a financial education when school leavers have 50+ years to live with the consequences of the current lack of provision.

Two different things, dealing with your own finances so you don't over-reach yourself and dealing with the financial services industry. I think the former could be usefully taught, although you can't teach against human nature; just point out the possible consequences. As far as the latter is concerned what do you teach? I would probably teach the exact opposite of what the government might teach, which is to say that I would taach children never to trust a financial 'expert/advisor' but to do it yourself (choose which companies to invest in) . Why do poeple go into the financial services industry? Because they like money; unfortunately it ends up bing your money.

Christopher

The point is that to deal successfully with the FS industry you need at least basic financial education. Without it what do you get? The series of scandals that have beset the industry in the past 25 years from Lehmann to Maxwell via mis-selling and the FSA debacle.

Maybe all our politicians need this financial education first.

Ian

The perceived wisdom is that for pensions say you invest in safe stocks and bonds till 5 years from retirement when you move into cash to preserve your capital. Then, when you come to invest your pension lump sum, you invest for income rather than capital gain (and even ignore the possiblility that the income vehicle may actually decrease in value). All this makes pots of money for your financial advisor and is totally illogical. There is no difference in logic (when investing a lump sum) between being in cash for the first five years and being in cash for the last five years or between enjoying income from an investment that does not appreciate and top slicing a capital gain from an investment that does appreciate. To be fair, any financial advisor that deviates from the percieved wisdom is probably leaving himself open to a charge of 'incompetence'. I am reluctant to have this barmy way of thinking re-inforced by being taught in schools. It is a bit like recreational drugs; there is a difference between what is taught and reality. We are taught that it is a good idea to own your house by taking out a mortgage. We are not taught that borrowing money against a fixed immovable asset is much more risky than investing your own money in a range of small companies. The latter IMHO being much better for the ecomomy.

So before we do any 'teaching' we have to get the lesson right.

I think the debate is about teaching finance in schools & not defending advice.

However Christopher your view of financial service advice the options for pensions & retirement seems to yet again tar us all with the same brush.

How about SIPPS & SSAS where clients can invest in business properties?

Investment Bonds have their places to provide income or protect from IHT & Care Fees within a Trust, ISAs & Collectives which utilise CGT allowance should be used for income capital growth where appropriate.

VCTs & EIS certainly form part of the advice I give which invest in smaller companies...like pensions they can be fantastic tax planning tool.

You seem to also miss the fact that there are lots of investments which are not correlated to stock market returns.

Risk & Return, asset allocation are important parts of any financial planning strategy.

I'm confused about a client taking tax free cash out of a pension as being bad advice.... Unless there are high guaranteed annuity rates normally taking TFC is advisable… any income from a Pension is treated as taxeable pay. If income is derived from the TFC, then it can be taken tax free. Also there are automatic death benefits on the TFC, whereas if annuity option is taken the fund can die with the client.

Christopher

Your concerns seem to centre on what is taught rather than whether to teach anything at all. Where we are at the moment is that nothing is taught, which allows the population to be easy prey to fraudsters and scheisters (otherwise known as banks and tied so-called "advisors".

Lets start with the basics (like what is money, what are shares etc) then the principles of risk and reward before worrying about whether and how to use the services of a financial advisor and how to control their activities. If we don't, we face more scandals and resulting losses which force the losses of the ignorant to be funded by those who take the trouble to be informed.

There is absolutely NO CHANCE that financial education could be delivered in schools at Key Stage 3 (where it would be needed). The curriculum is already crowded, the timetable tight, and the teachers too busy to manage their own personal finances satisfactorily.

I speak from experience of almost 20 years in secondary education having witnessed the most appalling inept attempts by PSHE teachers trying to explain that the figure you have written in your cheque book is what you can spend!

If teachers from Hertfordshire are reading this you know who you are!

Julie,

Yes there must be some excellent financiail advisors about. I just have not met any and I mean that sincerely. You may have misunderstood, I see nothing wrong with taking as much as possible from a pension as a lump sum; it's what is done with it over which I take issue. lInked to stockmarket is not good enough. I invested for years and years in a family income bond that was 'linked to the stockmarket' and 'tax free' and when it matured, I got absolutely abismal returns (after charges). The same applied to all my other 'managed' investments.

Even you, have to admit that much of your service to clients is in respect of assisting them with tax avoidance. Surtely you must find it rather strange that you finish up spending so much of your time on that, when a simpler tax system would make that part of your service to clients unnecessary. Or to put it another way why should someone have to pay you just in order that they do not pay more than their fair share of tax? Admittedly not your probem and your services are needed but still.

John Howard,

I know little of education in schools exept that most good teachers I know are trying to leave the profession and the person who gave the Richard Dimbleby memorial lecture this year did not recon much to it. As a University lecturer I found that students equated being educated with doing rather than thinking and did not think it particularly morally wrong to cheat.. I say again though, that I have little idea about how this came about or who is to blame.

Christopher.. … Recommending someone utilises their ISA allowance could be construed as tax avoidance..

Genuinely sorry you’ve had a bad experience with IFAs…

My compliance standard & those of the company I’m authorised through is simple…“Would you give that advice to your Mum?” If the advice passes that standard & we’ve done our best in turbulent times then I don’t think a client can ask much more.

Financial planning is about making sure clients achieve a decent return on their savings/pensions/investments to maintain their lifestyles…it’s about teaching clients to protect their assets so that if in worst case scenarios their families & themselves have a fall back.. It’s about managing risk & volatility….. asset allocation & the use of non-correlated assets as well as equity backed, fixed income assets…It’s about helping clients manage debts the smart way. It’s NOT about selling products.

Just a note about your gripes about a life office investment bond & it’s poor returns… I think most of us have moved on a great deal BTW! However had you had a stroke or an accident say and required long term residential care without nursing…… if you were on your own - practically ALL of your assets & all of your income may have been seized by the local authority and used to pay for your care long term. Bar £23K and THAT investment bond may have been ALL the Estate that would have been left to pass on to your family.

Quite frankly living in a rural community where there’s a huge amount of self-regulation in anycase…. it’s as much about sorting out the mess client’s get their finances in simply because they didn’t understand & in many cases got ripped off by someone - & in my experience not so much by IFAs but by you know who! THAT’s in the main what has driven my passion to educate the next generation.

John Howard -

We are working with Teachers to MAKE time in the Curriculum & I have emailed the education department about this very matter.

As one secondary school History teacher said to me a couple of weeks ago....

Teaching History is one thing.....but teaching this subject is surely far more important.

Perhaps we should wait until one of the big financial institutions does this for the nation & not bother....

Wait a minute!

As someone who once gave advice as an IFA and recruited to the industry I was horrifed by both the publics ignorance of basic maths and that of industry entrants (even at graduate level). Without that skill a financial products education is pretty much worthless so before we do anything else we need to get that basic requirement sorted. When you look at the background of most MPs you get an idea why the political class don't address this problem - their own backgrounds are pretty innumerate (the last Labour Cabinet was about as number adverse as you could imagine) but all persuasions share a shortage on this front.

We are all financial illiterates!

That is why we are where we are (insolvent)!

We need to establish a proper way to record financial transactions, and then teach it to the next generation.

It is pointless to teach them a 500 year old method that is way past its "sell by " date.

http://www.accountingweb.co.uk/blogs/jefflcbba/mad-lemming

All consumers should be tested for intelligence, general knowledge, literacy and numeracy. Those who get low scores on any of those should be banned from any financial transaction which will add up to more than a week's pay in a year - unless it is certified by someone with the required scores. The person with the required scores would receive 10 per cent of the value of the transaction but be liable for culpably bad advice.

The failures should be allowed to retake their exams a maximum of three times within five years. Three failures and they are permanently labelled as mentally incompetent and banned from any activity requiring more brains than a flea.

This is what is known as a long term solution.

I have always felt that the populations' ability to understand and manipulate numbers (and money..!) was damaged when Arithmetic stopped being taught as a subject in its own right. Back in the 60's, Maths was started in secondary school with Algebra and Geometry, not basic counting. The example used of the accumulated costs of buying the dress on credit would have been taught in the latter years of Primary School and the benefits of saving would have been brought home at the same time via the comparitive results of the compound versus simple interest calculation. Well worth turning this clock back I would have thought..!

What a fuss. It's not rocket science. It wouldn't be difficult to Integrate it at all levels into existing subjects from maths and Personal & Social Education, business studies, right through to drama. The opportunities are endless. Not beyond the professional capabilities of any teacher.

Never mind financial education what about improving education in general ?

That means cutting the hard left NUT down to size and allowing head teachers to fire incompetants. Keep up the great work Mr Gove the majority of us are right behind you.

Education is about teaching people to think, solve problenms, analyse data be sceptical, enthused, appreciate other cultures, etc etc. Not to spoonfeed information. There is not enough time inthe school day to build in everything that each interests group,however well meaning, wants included.

Also it stifles the ability of teachers to impart the skills that can then be used to learn more. I did not acquire any of my financial knowledge (such as it is) at school but healthy scepticism was probably the most useful approach that served me well later.

Martin: you say that "Education is about teaching people to think, solve problenms, analyse data be sceptical, enthused, appreciate other cultures, etc etc. Not to spoonfeed information." Really? Is this not the foundation of many of our problems as a country and with our education system; the unending mantra from teachers (I assume that you are - or at least have been - a teacher) that education is not about teaching facts but about "understanding other cultures"?

Bullsh*t. Education is about imparting information that prepares young people for their life after education, and there's no point in "appreciating other cultures" if when you visit those cultures you're incapable of understanding any of their language or entering into the most basic economic transaction because your maths teacher was more interested in "appreciating the culture" than in teaching you basic arithmetic!

GRRRRR!!

Ian, Thanks for your comments. Why did you pick that surname?. No, I am not a teacher. It's funny that you picked on one part of my comment and got so angry as though that was the main point I was trying to make. Shame about the asterisked word. I am beginning to sound like a teacher!

Education Is teaching people to be able and be interested in acquiring information . The idea that you learn at school and then go and live is misguided. We continue to learn all our lives. School is at most 1/6th of this.

I went to Syria this year - just cycling through. I did not speak Syrian (they didn't teach it at school) but got a lot out of my contact with the people. I learned a lot.

I will have a think about your viewpoint and will l test my own views. You could be right in some ways. Try it. So much better than getting angry.

Ian,

I have had a bit of a think and you are right. Teaching arithmetic at school is important - I wasn't really arguing against it. With that and an interest in learning people will become more adept at managing their financial affairs. Imparting information is a part of education but information is just an ingredient of education; real learning is being able to use that information in a productive way. Maybe you and I were not so far apart.

I still hold by my main point that school cannot be a place where we cram children with information (there's is too much out there to learn it all) but rather to teach them skills (like arithmetic), how to be selective/sceptical about what they are told (e.g by banks and credit card companies) and to think for themselves.

Try this:

http://www.ted.com/talks/ken_robinson_changing_education_paradigms.html

Enough from me

I would suggest that Ian Grumpy was showing more frustration than anger and when you read above that Julie Bayley, a purveyor of Financial Education 'educational' material, regards that such education is more important than history then I am not a little surprised about his feelings.

Understanding cultures is a little difficult to do without learning about your own to give some yardstick to measure it against and being able to contribute something to the conversation. Much of this comes from learning history - and I speak as an engineer.

The basic tools of learning anything are still reading, mathematics and writing [probably in that order]. Without those skills and some facts to work with and building experience, anything else is invariably achieved by a box ticking process to satisfy the lobby groups, political expediency or the latest media driven crisis.

A good example is the written part of the Driving Test. Multiple choice based where close to random answers will get you through. Have many youngsters learned from much this type of test as promised by the lobby groups? Not many that I know. Mind you I believe that their visual acuity is still tested in the same way - car number at around 20 yards - when a machine would do it accurately in a minute [ as my eyesight was tested in the USA 30 years ago) But that's progress in the UK for you!

Maybe we aren't too far apart, but my central point is that our society contracts with the education system to provide our young people with the grounding that they need to become useful members of society and to support themselves. Frankly the education system has breached that contract in the name of a new orthodoxy that promotes "appreciating other cultures" above the three Rs.

What does that lead to? Young people who can appreciate other cultures but cannot get jobs that will enable them to afford to go to those cultures because of their lack of basic skills, and the poor old taxpayer having to pick up the tab to support those young people, who incidentally ARE provided with the skills to enable them to claim benefits.

FYI I read neither the Daily Mail nor the Daily Express!

Martin I envy your trip to Syria - definitely high on my list of places to visit to sate my desire to visit as many ancient cultures as I can. While you didn't speak their language I could speculate how effective your communication with the Syrians would have been if their schools had not had the foresight to teach english, but instead had taught their young people to appreciate our culture.

I might also speculate what aspects of our culture the Syrians might appreciate - Premier League footballers and their behaviour on and off the pitch? Reality television stars - their place in modern British culture - discuss? Alcohol abuse and its effect on Britain's future? I could go on.

BTW I am not angry at you or posts on this and other sites - everyone is entitled to express an opinion and to have that opinion heard no matter how much I disagree, as long as you afford the same priviledge to me. What I am angry about is the waste of young peoples' futures that the NUT and Local Authority education departments' orthodoxy has caused in Britain.

Patrick - as someone who takes a keen interest in ancient history particularly I'd just like to point out...

that the comment wasn't made by me at all! It was made to me by a secondary school HISTORY teacher when I was explaning what we were trying to do.

ALL people are saying is that Life skill info is surely important. No one's expecting children to leave schools as investment experts...but in my opinion they need a basic knowledge of debt management & how to manage money....how the tax system works etc etc.

Comment from someone who has recently been taught in the Isle of Man, where financial education is more widely available in schools........ sums things up for me...

"I think studying Finance for the past 2 years has been invaluable. I'm now in a good position to understand the stock market and invest in securities responsibly. My friend and I have invested over £10,000 and seeing gradual returns - although I wont see much of it as it is his money!"

Of course we need financial education in schools, just like parenting skills. It's not just children who need financial education (they are not fired by it) but teachers who are woefully resistant to financial planning. The government needs more help too, their track record is abysmal!

Oh dear! Michael! ......and hygene, potty training, nose blowing etc etc?

Parents have a lead obligation to educate their offspring in the handling of money along with basic financial planning which we used to call a piggy bank, in conjunction with making sure that their kids understand right from wrong, moral from immoral, tolerance respect for others, table manners etc etc for living in society. It is for teachers to develop the tools needed for working in a society .

Financial instruments are far too ephemeral to be taught in schools and pension schemes are not that much better. As for parenting skills, how on earth did past generations get on! The trouble is the State, along with its satellites like the NHS. Now parents are bombarded with advice, much of it from vested interests, which is disrupting and confusing the parents and causing loss of self confidence as well as loss of confidence in the parent's parents. The hooping cough saga, health and safety, dietary mandates, best buy dates, sun bathing, breast feeding etc etc are all examples which generated unintended consequences much of it leading to the abrogation of parental responsibility. Now you want to teach that by bringing parental skills training into school!

One thing this generation doesn't need financial advice in is how to sue for compensation. Why? because there are so many vested interested firms pushing them to do so!

Oh Dear Patrick! I actually agree with everything you say! But we are still part of the Nanny State and as a teacher and parent i do my bit on these matters. No! I don't want to do some of these things but yes, if we don't, they wont get done. The fact still remains, despite yours & mine rational thinking, the politicians are failing us badly..hence the rise in our litiginous environment. Is it the role of teachers to provide the tools..they think their role is in their specific subject area..if it's funded (sic)

The general consensus is financial education is a good thing - it's the methodology and delivery that divides opinion.

Backing up what John Howard Norfolk said: FSA, DoE and other studies suggest teachers are not confident teaching FE and it is seldom given the same priority or prominence and viewed separate from PSHE.

Picking up on what Patrick Moore said: The issue is bigger than anyone provider and the FE and microfinance charity I work for, MyBnk, is proposing to the new APPG on FE a central source linking providers to schools, giving them access to the resources and terms they want.

We do not have to reinvent the wheel - rather than training and retraining masses of teachers, building a new syllabus and expending sparse resources, we can focus on small, dedicated and versatile groups of experts.

Christopher Carter made a good point about human nature, it's the attitude to money we need to change and FE and enterprise can do this.

The need has never been greater. Record youth unemployment, high tuition fees, budget cuts and a competitive jobs market means Britain has to build a new enterprise economy and, unlike older generations, young people cannot afford to learn the hard way - we can break the debt cycle and avoid the mistakes of the past.

Just an observation from a Tower Hamlets social enterprise!

Thank you Declan Wilkes!

Excellent Martin. Well worth a watch.