Managing money is an essential life skill that, until now, has never been taught at school. Financial education will soon be part of the National Curriculum, but the responsibility of equipping kids for the harsh realities of economic life should be shared with parents, too, says Lianne Kolirin…
Hands up if you remember Pythagoras’ theorem, the life cycle of frogs or the difference between stalactites and stalagmites? Now step forward if any of the above has come in useful since you left school. These are subjects that British children have been taught for generations, while money and how to manage it have been absent from the National Curriculum.
Now, thanks to campaigners such as Martin Lewis, founder and editor of MoneySavingExpert.com, financial education will be compulsory in secondary schools. He claims that ignoring this critical issue was to a disservice to our children, not to mention the economy. Last year, a study carried out by MoneySavingExpert.com found that this lack of financial education was costing the country £3.4 billion annually through unemployment, debt, fraud and scams. Finally, last week, Education Secretary Michael Gove announced a comprehensive overhaul of the curriculum, which will now include financial education.
‘For more than 20 years we’ve educated our youth into debt when they go to university, without educating them about debt,’ says Lewis. ‘We desperately need to break the cycle of financial illiteracy in the UK. It’s one of the causes of our current economic crisis and a huge contributor to continued mis-selling epidemics. Education is a cheap and easy way to fix the problem. So I’m jumping for joy at the news that financial education will be part of the National Curriculum for the first time… This is the first step in ensuring that every child has at least some basic financial education to help them navigate our complex consumer economy.’
The campaign was spearheaded by Lewis, the All Party Parliamentary Group on Financial Education for Young People (APPG) and the Personal Finance Education Group (PFEG). Changes recommended by the review will be implemented in 2014.
Financial education will be part of the Citizenship curriculum. Specifically it includes: Key Stage 3 (ages 11–14) – the functions and uses of money, the importance of personal budgeting, money management and a range of financial products and services, and Key Stage 4 (14–16) – wages, taxes, credit, debt, financial risk and a range of more sophisticated financial products and services. In addition, the new curriculum places a ‘renewed emphasis’ on mathematics, including financial mathematics.
‘Generations of young people will now gain the knowledge and skills they need to be able to manage their personal finances,’ says Justin Tomlinson MP, chair of the APPG on Financial Education for Young People. ‘This will make a real and lasting difference to financial capability in our country.’
Tracey Bleakley, chief executive of the PFEG, described the move as a ‘huge victory’ for campaigners. ‘Financial education is essential in equipping young people with the knowledge, skills and confidence they need to be able to manage their money well,’ she says. ‘With financial mathematics included as a part of Maths and financial capability included in Citizenship education for the first time, the campaign has achieved both of its objectives.’
Yet Britain remains in an economic slump with no end in sight. A recent poll found that 43 per cent of seven- to 16-year-olds worry about money and 96 per cent of pupils wish they learned more about personal finance at school. If we want to ensure a brighter future for our children, it’s vital that we teach them how to make sensible financial choices. Parents have a key role to play, but times are changing and so should the way we teach children to save, according to Mark Timbrell, founder and CEO of PKTMNY. His online company provides children with a contactless prepaid Visa debit card, which allows parents to control how and where they spend.
‘As a parent, I know just how difficult it is to teach children about money, especially as the school curriculum focuses on using cash and visiting banks, neither of which reflects how children see money being used,’ says Timbrell. ‘PKTMNY has been designed so that, in using it, children learn the value of money and gain the financial skills that will prepare them for the world they will grow into.’
The idea of giving your child a card with which to spend, spend, spend might alarm some parents. ‘PKTMNY makes spending, saving, managing transactions and checking balances easy and straightforward for children, using clear visuals and graphics,’ says clinical child psychologist Dr Elizabeth Kilbey. ‘The days of keeping money in little plastic pigs are gone. By using PKYMNY children can learn financial controls, risks and consequences under the watchful eyes of parents, who can monitor what their child is doing and decide when, or if, to step in with guidance and advice.’
5 ways to teach children how to manage money
The Personal Finance Education Group shares its five top tips on how best to introduce children to money
1 Talk to your children 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 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 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 to find employment 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 your money safe and planning for the future.
4 Explain the difference between needs and wants. Contrast examples of goods 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.
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.