What your kids aren't learning about money in school
A person is declared bankrupt every six minutes and 53 seconds in the UK. If that isn't bad enough, a fifth of university students struggling to survive on their maintenance loans are turning to medical trials, gambling and even adult work to cover their costs. And 42% of young adults (25- to 34-year-olds) don't check their credit score or even know what it is, according to new credit rating agency ClearScore.
Such stark statistics make it painfully clear that the country is in dire need of more and better financial education. And the sooner we get it, the better. As Aristotle said: "Good habits formed at youth make all the difference."
Progress is being made. For the past year, financial education has been included on the national curriculum for state secondary schools throughout the UK. In England, it's not being taught separately but instead included within personal social, health and economic education (PSHE), maths and citizenship lessons. The aim is to increase financial capability, which the Department for Education defines as "the ability to manage one's finances and to become a confident, questioning and informed consumer of financial services".
Matt Sanders, GoCompare.com's Money banking spokesperson, explains: "Preparing students for the financial decisions they will have to make as adults is vital in ensuring that future generations are capable of managing money to avoid finding themselves in difficult financial situations of their own making. For example, identifying credit cards, current accounts, loans and other financial products by looking beyond marketing messages or introductory offers to establish what the real value is, and how this meets the individual's actual needs."
While the inclusion of the subject on the curriculum has been significant in the country's commitment to nurturing more financially literate generations, there's a lot of room for further improvement.
Lack of training
Bushara Awen works at The Money Charity, which provides financial education workshops to schools across the UK. The charity works alongside teachers and has seen first-hand the difficulties they face. "Financial education simply isn't being taught as effectively as it could be for a number of reasons. For example, there's been no centralised training programme, meaning that many teachers don't have the confidence in the subject area to teach it well and no teachers have finance as their speciality," she explains.
There is also relatively little information about exactly what should be taught in the curriculum. "There are a lot of bullet points and broad financial terms instead of precise instructions on what and how to teach the subject," she explains. "Add to this the fact money remains a taboo for many people - so some teachers feel uneasy about talking to their pupils about it - and it becomes obvious why financial education isn't being taught as well as it could be."
With no assessment of the subject and schools being able to decide how much time they devote to covering it, it is very hard to measure how much and how well pupils are learning and improving their knowledge. Kirsty Bowman-Vaughan at the Money Advice Service (MAS) says a recent survey found only 59% of 15- to 16-year-olds said they hadn't received any financial education at school this year, up from 47% last year.
There are clearly major challenges to overcome in how schools deliver financial education, and Young Enterprise, which now incorporates pfeg - the group that campaigned to get financial education on the curriculum - is calling for teaching to begin sooner, in primary schools; something three-quarters of parents agree with, says ThinkMoney.
Whatever the next steps will be, Claire Young, an entrepreneur and a finalist on BBC's The Apprentice, is clear about what the focus should be. She visits schools across the UK to teach young people about enterprise. "You've got to make it fun and speak to kids on their level. Finance sounds boring but ‘be your own boss' or ‘become the next Apprentice or Dragon' sounds exciting."
She says that teaching kids about enterprise and getting them involved in running a business - whether that's a tuck shop or a cupcake stand - gets them thinking about costs and profit and learning about money in a way they can understand and get excited about. They don't see it as a boring maths lesson they're intimidated by.
"I've seen even the most disengaged kids in school - the ones who aren't academic achievers - embrace the enterprise challenges we set and it really gives them confidence in their abilities. It can even help their achievement in the rest of their studies."
Of course, the classroom isn't the only place young people can, or should, learn about money. When asked who should be most responsible for teaching people about money and how to manage their personal finances, while 45% of adults said schools, 41% said parents and families.
"Parents need to be encouraged to continue their children's personal finance education outside of school, putting the lessons they've learnt in the classroom into practice at home. Even little things like being encouraged to earn and save their pocket money, or being involved in the weekly food shop, can go a long way to getting young people ready for their future financial responsibilities," says Sanders from GoCompare.
You needn't worry about having to come up with clever ways to make the subject matter fun - because the experts already have. There is now a whole host of free tools, games and services you can take advantage of. For example, the Money Advice Service has put together some activities for parents to do with their children on its website. One for teaching younger children how money is all around us involves getting to think about the TV programmes they watch. "Talk to your child about how their favourite TV characters treat money," suggests the MAS. Get them to think about how much of what the characters do costs money, even if they're not shown handing it over, it adds. Or ask which of them are good role models in their attitude towards money.
To teach older children about peer pressure, it suggests getting out all your child's "must-have" items - clothes, games and so on. "For each item, ask why they wanted it and how often they've used it. This teaches them that wanting what friends have is different from wanting something because they really like it," it explains.
Stefan and Helen Dobrowolski from Ormskirk are helping their children get used to the world of budgeting and shopping. They've recently given their son Alex, 13, and his sister Ella, 15, Osper cards. These are pre-loaded debit cards parents can control by depositing money through an app or via the website. Each card costs £10 for a year's membership, with the first three months free, and give children the freedom to pay by card, withdraw cash from ATMs and shop online securely.
Within just a few weeks of using the cards, Stefan and Helen noticed big differences in how their children handled their money. For example, Alex is currently saving up to buy an adaptor for his headphones so that he can use them with his Xbox. He's only got £15 on his Osper card and the adaptor is £25. Previously, Stefan says he would've been quite likely to give him the £10 difference and put the debt up on the family blackboard where it'd be forgotten. Now, however, Alex talks to his parents about what he can do, other than wait for his next allowance, to be able to afford the headphone adaptor.
The couple also think Osper is good for improving their children's understanding of the cost of living. When Ella and Alex used to spend money online using their parents' debit cards, the kids felt the money was very separate from their allowances. But now that the teenagers do their own shopping with their Osper cards, they are beginning to learn to live within their means and mum and dad think this will help them make the right financial decisions as they grow up.
If you're not ready to let your kids loose with a debit card, Qwiddle is a good halfway house. Founder Vanessa Cameron describes it as an online piggybank for children. "It helps your child learn how to manage their own pocket money in a more secure, fun and hands-on way." It's powered by PayPal and owned and controlled by you, so your child can't spend money without your say-so. It's free to join - though some PayPal transactions can incur fees.
To get started, you create a PayPal account for your child. Your child's money is stored in the account and can only be withdrawn with the password you set. You can set savings goals and chores your kids can do to earn pocket money. Your child can view the account via Qwiddle and you can track their activity - their purchase requests - through the parent dashboard.
Cameron says that its users tend to deposit larger amounts at the outset (between £30 and £80), then make regular cash payments around the £5 mark on a weekly basis. "There are regional and age variations when it comes to pocket money but it does seem to be quite a personal decision made by parents who understand their children's maturity and attitude to money," she says.
Tracey Hill of William Howard School in Cumbria, the winner of Moneywise's Best Personal Finance teacher in Britain 2015, has the following advice for parents. "Remember, confidence with money is a life skill and you can never be too young to learn the importance of saving, budgeting and how to make choices with money."
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.
Your credit score is a three-digit number (ranging from a low of 300 to a high of 850) calculated from the information in your credit report. Your credit score enables lenders to determine how much of a credit risk you are. Basically, a low credit score indicates you present a higher risk of defaulting on your debt obligations than someone with a high score. If you have a low credit score, any products you successfully apply for will carry a higher rate of interest commensurate with this risk.