The topic of financial education is back in the spotlight with the Tories setting out plans on the issue.
Conservative Shadow Chancellor George Osborne has outlined a new policy which would mean young people aged 11 to 18 learning about money management at school.
The aim is to combat the “sobering low levels of financial literacy”.
A recent survey by Aegon IFA Insights has found that nearly two-thirds of IFAs believe lack of education and understanding of individual financial needs has been “very important” in contributing to the savings gap.
According to the survey, most IFAs think financial education in schools could lead people to seek more independent financial advice.
Needanadviser.com director Jo Roberts says the Tory plan has raised the profile of the need for good financial education.
She says: “The country has been crying out for this for years. Anyone who starts banging on about it makes it better for everyone.”
Informed Choice managing director Nick Bamford says increased financial literacy is essential and would lead to people making more responsible decisions.
He says: “Financial education is a skill that young people should have. If we educate young people better at school and in college, they will manage their money better.”
The Resolution Foundation has published research which supports this theory. It shows that young people in the low to moderate-income group would be £60,000 better off by the time they reach 60 if they were given financial education or advice.
It also found that the Government could save £100m a year within 10 years of the education or advice being provided, as fewer people would require pension credits.
The Personal Finance Education Group is a charity which promotes financial studies as a subject in schools but it says the decision is still at the discretion of schools and many are choosing not to implement it.
Director of policy Alastair Mathews says: “It is discretionary. You cannot be sure that any school is teaching financial education at any one time. It is not a Government requirement.”
He believes schools are not taking up financial education because teachers lack the expertise but says most teachers recognise the need and if they get support and resources they are much more willing to give it a try.
Last month, the Government announced a 10-year strategy on financial capability and is due to publish a report this year.
Standard Life is involved in two initiatives to improve financial literacy. First, it is sponsoring Money Week, a programme developed by Dunblane primary school head mistress Roz McEwan. Schools assign a week for children to learn about money in different ways, depending on their age.
Standard PR manager Yvonne Savage says: “Ms McEwan realised that some resources were being put into financial literacy in secondary schools but not in primary schools. Psychological research shows that people’s views on money are pretty much embedded by age 12 but there was nothing being done to educate young children on money and the value of money.”
Standard is also working with the Scottish Book Trust to produce a series of children’s books, in the style of the Mr Men, to be launched next May. The story books, written by four authors, are being piloted in Edinburgh, Glasgow and Renfrewshire until April. Students from the Edinburgh College of Art will provide illustrations.
Savage says: “The authors are using storytelling to get the message across to children. The books are not about money but they all have a financial theme. People need to be educated but also engaged and I think these books will engage children.”
Roberts says: “Standard Life are making a business decision but it will help the ‘adults of tomorrow’ and pictures will help too.”
The Royal Bank of Scotland and NatWest have been running a financial education programme called Face2Face with Finance for 12 years. This year, it has introduced School Money, a scheme where banks run by students are set up in 100 inner city primary and secondary schools. The students involved will get cashier training from bank staff and pupils can set up bank accounts. RBS research shows that 66 per cent of 14 to 18-year-olds from low-income areas have never had any formal or informal financial education and 39 per cent would like to receive more.
RBS says the hand-on experience offers a practical approach to numeracy, managing personal finances and installing the ethos of saving from an early age.
Bamford says it is a positive step but education should focus on the consequences of short-term debt more than how to save.
He says: “There will be a huge benefit if people understand the nasty consequences of debt.”
Mathews believes these initiatives are positive and there is no shortage of resources for teachers. He says that other product providers such as Prudential and Norwich Union have produced documents and games to help children learn and teachers teach the subject of financial education.
The PFEG is also setting up a database of financial volunteers for teachers to contact, sorted by postcode, in collaboration with Institute of Chartered Accountants and GE Money.