Conal Gregory: Lessons in finance could ease the debt problems of the future

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Aristotle’s quip that “good habits formed at youth make all the difference” should certainly apply to handling money and its application in life. Yet to judge by the high proportion that does not understand financial planning by adulthood, our educational system is letting children down.

So many youngsters leave school with little or no appreciation of the world of money which largely explains why over 60 per cent have debt problems before they reach 40.

Many parents either decline to discuss money or are embarrassed as they have personal debt difficulties. They expect the educational sector to fill the gap. There is a challenge ahead as analysis by the Money Advice Centre reveals that 16.8m people hold less than £100 in savings.

Social media advertising constantly pushes the under 25-year-olds to spend, depicting icons of modern society with lifestyles that cost way beyond the average salary. Many, even university students, are drawn into debt through instant credit offers without comprehending the terms.

Tom Murray from Exaxe, an insurance technology provider, gives complex mobile phone tariffs and download charges as an example, saying they “are not immediately visible (and) that teenagers end up with debt levels without realising it. They are soon in a position where they are unable to cope”.

To counter this financial illiteracy, primary school children in their first year are taught the value of each coin and how to obtain change, often involving shopping examples. Towards the end of primary – in years 5 and 6 – children are encouraged to explore using money wisely, such as understanding which of the following typical deals is better:

40 per cent off £20

50 per cent off £30.

Children have “projects like designing and building a theme park with a budget and deciding what rides and equipment they can afford”, says Emma Bellamy, head of Lound Academy Trust in Chapeltown, Sheffield.

Bellamy adds that Lound teachers talk to the children about saving pocket money to gain a more expensive toy “but this is not directed in the national curriculum.”

Finance has moved on incredibly since most parents were at school. Debit cards for paying pocket money and the ability of younger children to make purchases via mobile phones are two developments which move away from the physical concept of money.

Yorkshire Building Society, the second largest building society by assets (£50,417m to Nationwide’s £236,035m), started a financial education programme in schools in 2016. Known as ‘Money Minds’, over 6,000 pupils from 118 schools across Yorkshire have received a lesson.

It is a free programme, consisting of activities and projects designed to promote discussion among those aged five to 19 years. Topics range from keeping money safe (age five to seven), planning a party to learn budgeting skills (age eight to 11 years) and how to calculate interest and responsibilities to repay loans (older children).

The society delivers this programme as part of its corporate volunteering scheme whereby each employee is allowed up to 31 hours’ paid leave annually to help local communities.

Such work in schools should teach youngsters the risks involved in succumbing to payday loan advertisements.

Retirement to youngsters sounds a million years away. How to provide for it is not understood by millions and ought to be part of secondary education. As a result of such a lack of knowledge, until pension auto-enrolment started, far too many adults had made no provision for later life. Yet the state payment – currently just £168.80 per week or £8,767.20pa – is unlikely to maintain current lifestyle. Since a pension can be started for even a baby, there is a good opportunity to outline ways to fund the post-work era.

Statutory financial education was introduced to the secondary curriculum in England five years ago but many teachers have not yet received sufficient training to explain the benefits of income protection and critical illness.

One of the key books that ought to be in the hands of every teenager is Yummi Yoghurt: A first taste of stock market investment by John Lee, which has just been published (Grosvenor House, £10). In clear English, it explains the world of investment and how such knowledge can be empowering.

This year a financial education charity for young people brought its award-winning programmes to Yorkshire for the first time. Experts from MyBnk, together with the debt specialists Stepchange, have assisted almost 1,000 indebted or at risk young adults to manage their money in schools, colleges and youth organisations.

Since 2007, MyBank have helped over 220,000 young people to learn how to manage their money. This summer their locations have included Barnsley and Askham Bryan College, York.

The two year ‘Money Works’ partnership gives 16-25 year-olds eight hours of face-to-face workshops which include budgeting, borrowing, benefits and taxation. The Money Advice Service has evaluated that, following this initiative, saving regularly increased by 23 per cent and debts fell by 60 per cent. The programmes address financial aspects of independence ranging from salary slips, tax and National Insurance to benefits, household expenses and universal credit. They cover how banks work, current and savings accounts, interest and forms of payment.

Borrowing is also a strategic part of the teaching. It covers credit history, debt consequences and the importance of setting goals.

MyBnk gives specialist financial training to teachers who have had a minimum two years’ classroom experience. They are examined and retested every six months.

At the primary level, pupils are made aware of money habits, how to prioritise needs, budgeting and the costs of living. Teachers explain the benefits of saving, calculating interest as a reward or charge and understanding risk.

At the secondary level, investing, pensions, credit and debit, fraud and scams are discussed with other vital money subjects. For those aged 16-18 years who are considering higher education, the course runs from bursaries and part-time jobs to student budgeting, debit and credit cards and bank accounts. To make it as realistic as possible, the charity uses real life money stories and student vox pop videos whilst discussing useful internet resources.

Making personal finance a compulsory examination subject may be some time away but “only then would students realise its importance”, says Murray. It is a life skill which all children will benefit from. In view of the rising levels of consumer debt, notably among the young, it is an educational investment which will repay handsomely.

Many in the financial community support such a development. One of its most eloquent champions is the TV pundit with bright braces, Justin Urquhart-Stewart, co-founder of Seven Investment Management (7IM) and formerly of Barclays.

If how to manage income was taught in schools and colleges, a far more secure future would be likely irrespective of individual earnings.