Obtaining an education is about much more than learning to read and write; in the digital age, younger generations are being called upon to make a significantly greater number of financial decisions than in past years, which means that we need to ensure that our children understand the nature and consequences of the financial decisions they make.

An interesting report by the OECD entitled Financial Education for Youth: the Role of Schools notes that there are various factors that point to a growing need for financial literacy to be taught at schools. These include the rise of the middle classes in emerging economies, reduced levels of public and private support systems and shifting demographic profiles, including the increased percentage of elderly persons in countries like the UK – there are some 10 million people in the UK aged over 65 and by 2050, that number will have doubled to approximately 19 million. The larger percentage of elderly people in the population also represents a greater challenged for the NHS.

The recent global financial crisis was also considered by many financial experts in the UK to be a wake-up call to the need for greater financial literacy. In other European countries such as Spain, rising eviction rates revealed the unsound nature of many mortgages, whose interest rates continued to rise in the midst of one of the highest unemployment figures the country had seen in years.

The importance of financial literacy extends beyond individual financial stability; at a recent Asia-Pacific Economic Cooperation (APEC) meeting, it was noted that “financial literacy as a critical life skill in the 21st century can contribute to individual and families’ well-being as well as to financial stability in our economies.” The idea that the health of the global economy depends strongly on the importance we give to financial literacy in schools, is echoed by Russia’s G20 Presidency and the OECD.

What is financial literacy?

Financial literacy can be defined as a collection of skills, which include managing one’s finances and understanding concepts like income, interest rates, investments, expenditure and credit.

Financially literate individuals know how to make financial decisions with confidence and know how to analyse the consequences of their choices. Their knowledge makes it possible to make good investments, create wealth, and consider various credit options when necessary, choosing the best loan/mortgage based on their circumstances.

Why should financial literacy be taught at schools?

In addition to the positive impact of financial literacy on personal financial stability and the economy as a whole, there are many additional reasons why students should understand financial management from an early age. These include:

  • The changing face of financial transactions: Globalisation and new developments in technology have created a growing demand for financial products and services. The rise in numbers of online sales transactions mean that the average person often relies on financial services to make and receive payments and it is vital that users know how to distinguish between different financial providers, so as not to fall prey to higher costs and interests payments, etc.
  • The reduction in support from the state: A reduction in pensions and cuts to healthcare mean that individuals need to be more focussed on providing for their financial future than in generations past. According to the OECD, many workers to do not know enough about different pension schemes or to assess the risks they may have to face, including unemployment, unstable financial markets and health costs.
  • The great cost of financial illiteracy: In a report entitled The Impact of Financial Literacy Around the World, Bilal Zia (of the World Bank) notes that those who lack financial literacy tend to make a number of bad decision, which include not planning for retirement, borrowing at higher interest rates, acquiring fewer assets, being reticent to diversify financial portfolios, overestimating credit ratings and being more likely to default on mortgages.
  • The percentage of unpaid students loans in the UK: The percentage of students who are not paying their loans is reaching a critical level in the UK, with the write-off figure quickly approaching the 48.6 per cent mark, according to Universities Minister, David Willetts.
  • Better investment opportunities: Those who are financially literate have a better chance of getting the most out of their money through wise investments, stock market participation and making better portfolio choices.

How can UK schools help?

There is a clear link between education and financial literacy; as it stands, however, the proportion of financial savvy individuals hailing from higher income families far outweighs that of students from poorer backgrounds. Financial literacy must be promoted among students from all backgrounds.

The implementation of financial literacy programmes involves various steps, including receiving government support for dedicated programmes, establishing cross-curricular methods of teaching and using entertaining games and activities to increase children’s self-confidence in the subject matter. Evaluation of all programmes adapted is likewise required.

Financial literacy and the revised national curriculum

As of September, 2014, the revised National Curriculum will take effect, requiring financial education to be taught in English secondary schools in different subjects, including Maths (mathematics as it is applied to finance) and Citizenship (students will learn the role and use of money, how to budget, how to manage risk, income and expenditure, credit and debt, insuring, savings, pensions and other important financial products). Primary school children will also be taught basic financial literacy skills by being asked to solve mathematical problems in a context involving money.

What will children be learning?

Under the new National Curriculum, it is hoped that children will be taught to understand the nature, types and value of money. They need to know their rights and responsibilities as a consumer, and the risks involved in consumption, as well as the different means private enterprises employ to encourage us to part with our money (advertising, social networks, blogs, etc.). Students need to learn to use the various technological tools available to manage money and they should give due importance to responsible consumption.





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A vagabond traveler whose first love is the written word, I advocate for continuous learning, cycling, and the joy only a beloved pet can bring. There is plenty else I am passionate about, but those three should do it, for now.