How financially savvy are your kids?
Later this year, school pupils in England will be taught how to manage their finances for the very first time. The move, set to be introduced to the classroom from September, will see 11- to 16-year olds tackle topics such as debt, income tax and money management following concerns that school-leavers are entering work or university without knowing their Isas from their overdrafts.
But some schools are already a step ahead. Moneywise's Rob Goodman packed his schoolbag and went to visit one to find out what kids are learning about finance and what they think about it.
Waking up early for the 7.12am train to Reading, I was rather unsure about how successful my trip back to the classroom would be.
I had been kindly invited to a personal finance session at the Blessed Hugh Faringdon Catholic School and was eager to find out how much pupils knew about money matters. But my enthusiasm was tempered by a nagging suspicion the pupils would be thoroughly uninterested, or worse, bored, by a Friday morning lesson about all things financial.
Deciding between 'needs and wants'
The session had been organised by the Personal Finance Education Group (Pfeg), which provides resources, teaching plans and guidance to schools across the country looking to boost their pupils' grasp of the financial basics we all need when we reach adulthood.
On arrival at the school, I was welcomed by assistant headteacher Sue Matthews and head of business teaching Tim Howlett. Andy Willoughby from insurer Prudential, which is supporting financial education in the classroom, was also on hand. They explained the purpose of the day's lesson was to get the children thinking about how to manage their money and how to prioritise cash between 'needs and wants'.
I can't say I wasn't a little perturbed when I found out how young the pupils would be – a Year Eight class of 12- and 13-year olds. I was dubious about how much they would get out of a class, which I assumed would be more beneficial to older pupils.
But on entering the classroom and seeing all their smiling faces, I became a little more optimistic. The class was split into two groups to consider the finances of two imaginary people who have £1,000 and £3,000 to spend. Working in pairs, the kids had to decide how best the individuals should spend the money from a list of eight options – ranging from saving in an Isa and paying off credit card debt to going on holiday with friends and buying a new car.
The first thing that struck me was just how switched on and well-informed some of the children were. They were familiar with, and able to explain, topics such as overdrafts and credit cards.
Some of the pupils even scribbled down some quick maths in order to get the most out of their budget and make the best decisions for their imaginary person in need of financial advice.
Observing their work with Howlett, it was excellent to see them taking it so seriously – and most importantly of all - understanding why it was being taught to them.
More impressive, though, was the discussion that followed about the financial decisions the children had made.
I was expecting the debate to have been framed in black-and-white terms – holding no debt at all is good, while using credit is bad. But it was testament to the quality of the teaching from Howlett and Willoughby that they were able to show that money management is a much more complex issue than that.
For many of the children, it was not a case of going without any 'wants' they explained, but that a balance had to be found between wants and needs.
"It is really important we all help enhance children's awareness of these things," says Willoughby from Prudential, who volunteers for community-based projects. "I was blown away by the maturity the children showed with their answers."
While the school has been running several financial sessions with pupils across all year groups, Howlett says it plans to introduce a regular programme of lessons for all pupils from September. He hopes all schools will take the subject as seriously as Blessed Hugh has done because he, and his fellow teachers, think it can make a massive difference to young people.
Drop-in sessions for sixth-formers
Howlett says that up until recently staff had been concerned that some of their sixth-form pupils' financial knowledge was not up to scratch and, in response, began to run a series of drop-in sessions for pupils preparing to leave home for the first time and head to university.
"I think learning about things like this are a necessity," he says. "Some pupils in Years 12 and 13 think they know it all. We have one student here, who is very bright and will be going to university, who didn't know the difference between a credit card and debit card."
He says other pupils who participate in the sessions seem to think a credit card is "either something you are meant to max out completely or don't use at all".
So the staff try to teach them that actually there is a happy medium to be had. "You need a balance, you need a credit rating for things like getting a mortgage," he says.
I spoke to a pair of sixth-formers, Dan McCartney and Ciara Ryan, who told me they agreed that lessons in personal finance were a worthy investment of teaching time. For them, the most important thing at the moment is going to university so sorting out student loans is a priority, they added.
"But when we go, the main thing will be our living costs – which we have never had to deal with before. The drop-in sessions have been helpful for us," says Ryan.
If other schools commit to money matters as seriously as much as they do at Blessed Hugh then surely the inclusion of financial education on the National Curriculum from September can only be a good thing for pupils.
As for the Year Eight pupils I visited, I hope they will remember today's lesson as they get older and that it helps them take financial responsibility as they grow up.
Your child can win three Tesco Hudl tablet computers for their class, courtesy of Moneywise and Tesco. Click here to find out more.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
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.