Has finance education taken off?
Last September, the world of personal finance received a big boost when it was included in the National Curriculum for secondary schools. Pupils across the UK are now being given lessons in how to manage their money, financial products, how to plan for their financial future and a whole lot more in their citizenship, maths and PSHE (personal, social, health and economic) lessons.
The aim is to make youngsters more financially savvy but has it made any difference?
Moneywise spoke to those behind the campaign to get personal finance on the curriculum and those trying to improve financial education to see how the first four months have gone.
Justin Tomlinson, Conservative MP for North Swindon, was the chair of the All Party Parliamentary Group on Financial Education for Young People, which helped get personal finance introduced in our schools.
He says that its introduction is something the campaign should be very proud of as it is vital to increase teenagers understanding of all sorts of financial matters.
"Of the 150 campaigns that tried to get a subject added to the curriculum, ours was the only one that worked - we had cross-party support and thousands of different people and organisations supporting us," he says.
"I felt it was essential that, in an increasingly complex world, we equipped the next generation of consumers to make informed and savvy decisions. We were also keen that the lessons wouldn't moralise about financial choices. They are about making informed decisions and everyone's financial circumstances are different.
"The initial feedback we have had has been very positive but we will be waiting for the first year to be completed before we see how it has gone." This view was supported by Russell Winnard, senior education consultant with financial education charity Pfeg (Personal Finance Education Group), which also played a pivotal role in getting it in the classroom.
"It is still in its very early stages," he says. "The classes can be delivered in all sorts of different ways, so, for example, some teachers may do financial education as a module as part of the citizenship lessons but they might not do it until the summer term.
"But where schools have delivered, there have been great surprises for us. In terms of engagement, every teacher has told us that you really get the sense that the pupils are engaged in the topic and enjoy learning about it, which is obviously great.
"And it seems that financial education is making its way back into the family home. We have heard about pupils picking up on something and then speaking to their family about it, who then realise there might be better way of dealing with some aspect of their finances. It has been very powerful."
When it comes to maths, Pfeg is currently running a training project for teachers in London to help them deliver questions that have a personal finance context. Winnard says that the London Lead project, which will run to March, has already had an impact for both teacher and pupils alike.
"The preliminary results have been really, really interesting," he says. "We have seen an increase in achievement for pupils who have answered maths questions using personal finance as a context."
The feedback from schools has clearly been positive so far but what about those teenagers who are about to leave home for the first time when they head to university?
Vivi Friedgut is the founder of independent financial education company Blackbullion, which focuses on providing help and support to students. She says 18- and 19-year olds really do have a lack of understanding when it comes to cash. "Unfortunately, the range of questions we get from students is as long as your arm," says Freidgut.
"They know how to spend it but they just don't understand money as a concept. For example, they are very comfortable with getting a £9,000 student loan but our research shows that the majority still don't fully understand how they work or how much they have to pay back. The challenge is not insurmountable but it is significant."
New research from Blackbullion found that the average student debt upon graduation now stands at an eye-watering £44,015, while one in 10 students is likely to quit their studies because of the financial pressures higher education places on them.
Little wonder then that Friedgut is a firm believer in teaching children about personal finance – provided it is done in the correct way.
"Research shows that children form their attitudes towards money by the time they are six or seven, so obviously it is better to have children learning as early as possible," she says.
"But it is not a matter of something is better than nothing. What you find is that people often overestimate their understanding of money, so you need to be careful. It needs to be done in the right way – it needs to be engaging and fun for pupils and students to learn properly."
So while financial education is still very much in its early stages, the signs are that it is already having a tangible impact on making teenagers more aware of their money matters, and how important it is to have a mature attitude to their finances too.
Five ways to help your child
We asked Pfeg to put together some helpful tips about how you can reinforce your child's financial education at home.
1. Talk to them about money. It sounds simple but this is the most effective way to help your children understand personal finance. Explain how you arrive at financial decisions, what's in your budget (or if you don't have one, why not do one together?) and how different aspects of dealing with money make you feel.
2. Teach them where money comes from. We're an increasingly cashless society, and thanks to the invention of cashback at the tills it's easy for children to assume that the supermarket is the source of all of your funds. Showing your child your payslip and explaining what you had to do at work to earn the money and how you found employment in the first place are good ways of building financial understanding.
3. Set savings challenges. If you give your child pocket money, talk to them about setting a savings target and encourage them to adopt good habits early. This is a good opportunity to introduce ideas around keeping their money safe and planning for the future.
4. Explain the difference between needs and wants. Contrast examples of things they need every day, such as food and clothing, and items or toys they might want but don't need. This is a great way of introducing the concept of saving and the need
to exercise restraint in their spending, as well
as helping them to understand that occasionally times will be hard and you won't be able to afford everything everyone wants.
5. Involve them in the weekly shop. As you go around the supermarket, ask your children to choose the best-value combinations of set products and get them to do the adding up as you go from aisle to aisle. As well as learning valuable lessons, your new helpers can make your job easier at the same time.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.