Financial education has become a hot topic – and it is about time. There is no doubt that many people of all ages are confused by finance whether it is how to obtain a good deal or cope with debt.
This is an issue which is gaining momentum and various initiatives are now on the agenda. But it is also massive in the reach needed. At one end of the scale, children in primary schools would benefit from understanding the basics of money and secondary school pupils on how to manage their finances.
Beyond this, there are millions of adults who are lacking in knowledge. According to the Citizens Advice Bureau, it dealt with 1.25 million new cases of debt-related problems last year. Plenty of people simply lack confidence about managing their money – they may not feel sure about how to switch bank accounts, for example, or remain stuck with an uncompetitive mortgage.
National strategy
There is now a National Strategy for Financial Capability in the UK, led by the Financial Services Authority (FSA), which brings together the financial services industry, consumer groups, voluntary organisations, the media and government.
The seven-point plan sets out how the National Strategy for Financial Capability will help to provide financial education and advice in UK schools, universities, colleges, the workplace and organisations that help young adults.
A taskforce to research and design a national generic financial advice service – ensuring that every person, including those on the lowest incomes, can get access to good quality financial advice has also been set up. The government will publish an action plan by the end of 2007 setting out how financial capability will be integrated into existing services, particularly for those most vulnerable to the consequences of poor financial skills.
This is a campaign which is gathering pace and both the Building Societies Association and Council of Mortgage Lenders have spoken out in favour of raising standards and making personal finance a compulsory subject in schools.
Certainly here though, initiatives have been piecemeal. Back in 2000, the FSA launched a teaching aid, Money Counts, aimed at teaching personal finance in primary schools – this could be used with children from reception classes to year six.
Further materials have been produced for secondary school children who should now be given personal finance education as part of personal, social and health education classes.
However, not all schools will be using the materials and teachers themselves will have differing levels of experience in the topic.
In 2005, the Department of Work and Pensions conducted a review of existing provision. It was found that take up and effectiveness of financial education was patchy because it is a non-statutory subject.
But, pressure has grown and from last September financial capability became a part of enterprise education – aimed at helping young people to be more enterprising and develop economic and business understanding.
Schools now receive funding to provide such education to pupils aged 14-16, but while it is progress, there is no doubt more could be done to help make finance seem more relevant.
The FSA is aware of this and last June conducted a benchmarking study – Personal Finance Education in Schools.
This was critical of existing provision and stated the topic had a low profile on the curriculum. It also said that there was a narrow range of personal finance topics covered, and that these were delivered infrequently and with inconsistency. Unsurprisingly, the FSA concluded ‘there is a need to engage with and enthuse schools to carry out personal finance work’.
No room for complacency
Clearly, no one can be complacent. Training body, the ifs School of Finance, has said personal finance education in the UK is currently ‘chaotic’ and it conducted a survey which showed in more than 70 per cent of schools, personal financial education was in the form of ‘occasional lessons’ and happening ‘once or twice a term or less’.
It also wants personal finance education to go beyond simply being provided in maths lessons, saying it should be viewed in a wider context.
So, a growing number of financial services providers have been looking at how they can offer help. We do, after all, develop the products that people buy.
Teachers will not necessarily have a full understanding of how financial products are best used and so useful back-up can be provided by those who have made a career in the industry.
By working together, hopefully people in the industry can pass on their experience – and importantly enthusiasm – for the subject to both teachers and students of all ages.
For example, Platform’s parent company Britannia Building Society has recently launched a financial education programme which will be delivered by its staff to school pupils.
It is currently being rolled out to schools across Staffordshire, Derbyshire and Cheshire and consists of 30 minute workshops and activities designed for 14 to 16 year olds. The aim is to make the topic fun and informative and it is delivered by 86 of our employees – they do this voluntarily and have been given training. Topics include:
• Financial jargon
• Opening an account
• Banks, building societies and interest
• Budgeting
• Planning for bigger purchases
• Credit
Claire Irons, Britannia’s Programme Coordinator, comments: "This is going to be an ongoing programme and we want to do more. Everyone finds it really rewarding – certainly the need is there - a survey published by the FSA revealed more than 40 per cent of 18 - 20-year-olds were unable to answer a question about interest rates, compared to just 14 per cent of people aged 50 and above.”
Britannia employees are also involved in Number Partners, a national independent volunteering scheme.
Volunteers from a range of businesses and the local community play specially designed board games, videos and other resources with children aged seven to 14 and this takes place typically for around half an hour a week. Those children taking part typically are under confident in their ability to do maths and find it harder to communicate using numbers.
The savings game involves players saving up for a major purchase, working their way around the board by picking up cards for expenditure and income. They will get jobs – and lose them – and have to make routine purchases along the way.
The aim is to see what can be achieved by saving carefully enough. Players must juggle money between cash and different bank accounts.
Industry involvement
There is plenty of scope for more of us in the mortgage industry to get involved. Allowing employees to take part in community projects does mean they need to take time out of the office – but it also brings benefits to both employees and students.
The vast majority of those working in financial services have learned about our industry because we had good training and often, excellent mentors. We attend workshops as well as learning through experience – but we may not be good at getting across what we do to others. We are all probably guilty of using too much jargon that is baffling to outsiders and we constantly need to look at the way we communicate our services.
In the specialist sector, we may be providing products for those with credit problems. Certainly here there is a wider role for the broker in particular to look at longer term solutions and explaining these in a way which is clear and accessible. There is a lot of information out there – some of which may be conflicting and confusing – whether on the high street, on the internet or in the media
generally.
There remains a vital role for experienced brokers to explain options and give detailed advice to those who may have been rejected in the past and perhaps found direct staff unhelpful or even patronising.
It is good to see that progress is happening. For example, the Citizens Advice Bureau was recently awarded grants for financial capability programmes to help more people to learn to budget, save and borrow wisely.
But, people need to feel empowered to understand what is available and to ask questions. There is scope for more of us to help our existing customers and the next generation to be financially literate.
There is no doubt that if we look back at product literature for example, from years ago, it is now far clearer and mortgage intermediaries too are far more focused on transparency. Let us be upbeat about the progress made, and the fact that financial education is becoming high profile – and where possible there is also a role for many of us to play in ensuring this remains high on the agenda.
