Financial Planning is an important step in building a secure future. However, most people struggle even with basic financial planning. Should things be fixed at a fundamental level? Is the UK school curriculum for financial education enough to teach children how to tackle a financial crisis. This article contains our outlook on the issue.
The fast-paced, intellectual, and opinionated generation of millennials, want to control all aspects of their lives. But when it comes to personal finances, even the 20-somethings are pretty clueless about what they can do to manage their money better.
A recent study revealed that a whopping 9/10 (93%) Britons feel that they lack proper financial education in terms of personal finance. 47% of the Britons believe that their bank should assist them in making informed financial decisions. This study also indicated that 67% of people in the UK feel under-confident while making a financial decision on their own, while 68% admit that they aren’t financially observant. With such disturbing statistics about financial literacy, it’s high time we realize it’s importance.
The significance of financial literacy in one’s life cannot be emphasized enough. Young adults all over struggle to make important financial decisions such as choosing a credit card, retirement plans, taking out a loan. Although financial education has been a part of the regular school curriculum since 2014, it remains neglected.
To try and identify the root cause of this problem, we dug deeper into this issue and analysed how Financial Illiteracy is an epidemic affecting the young adults of the UK.
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A fact check into financial illiteracy in the UK
- A Financial Lives Survey conducted by FCA demonstrated that those falling between 18-24 years of age, consider themselves least-equipped and confident in terms of financial decision-making. Over 50% of adults feel poor financial management is taking a toll on their mental health.
- It’s been over 5 years since the statutory inclusion of Financial education in the national school curriculum in the UK. Despite this initiative, there are several gaps as to how and when this education should be imparted to students.
- Schools have made substantial progress as 64% of the students said they had access to Financial education in 2019, as opposed to a meagre 29% in 2015. However, 86% of the students said they acquired their financial understanding outside of school – through their parents or on their own through the internet.
- While 42% said they would want their parents to discuss money management with them, 82% of the students indicated that they would prefer to learn financial management in school.
Financial Management is a vast field of study, but most students feel the need to understand subjects that would aid them in a real-life financial crisis. Therefore, tax, budgeting, and debt management topped the list of the most sought after financial subjects.
Financial planning is complex. To follow it is difficult as it is, but teaching someone how to strategize their spending and become more financially aware, requires fundamental knowledge and technical skill. Perhaps practical demonstrations of money problems could make students better equipped at handling real-life financial catastrophes.
Financial education in schools
The UK planned a systematic introduction of financial education in schools across the nation, in 2014. As per the curriculum, the following are the key points currently being covered in schools, as per the All Parliamentary Group on Financial Education & the Curriculum:
Key Stage 1
- Recognize and know the value of different denominations of coins and notes.
- Find different combinations of coins that equal the same amounts of money.
- Solve simple addition and subtraction of money of the same unit, including giving change.
Key Stage 2
- Add and subtract amounts of money to give change, using both pounds and pence in practical contexts
- Solve simple money problems involving fractions and decimals to two decimal places
- Estimate, compare and calculate different measures, including money in pounds and pence
- Solve problems involving finance measurement using decimal notation and scaling
Key Stage 3
- Use standard units of mass, length, time, money and other measures
- Solve problems involving percentage change
- Use compound units such as speed, unit pricing and density to solve problems
Key Stage 4
- Work out VAT with the aid of a calculator
- Compare different offers for loans and savings
- Show an understanding of planning and managing finances
- Work out the new income following a percentage change (e.g. NI)
- Use percentages when comparing investments
Over 50% of the teachers feel that the curriculum followed at schools doesn’t suffice when it comes to securing the financial future of the UK’s children. The current scenario of household and personal debt in the UK, implies that improper financial education proves detrimental in the future.
Can any improvements be incorporated?
Just like we’re taught about the dangers of smoking or drinking, the risks of debt and poor money management should be emphasized in schools and homes, alike. Schools need to start reinforcing that financial planning and decision making are crucial life skills.
We understand how difficult it can get to teach someone how to manage their money and assets. Therefore, we’ve picked up some insights as to how financial education at schools can be improvised:
- Using an interactive approach: Financial management works differently from other subjects of the likes of English or Science. This subject should ideally provide students with hands-on experience to tackle a crisis. Therefore, students could benefit from experiential learning through problem-solving techniques and interactive videos that cover budgeting, and smart spending.
- Using free resources: Teachers could use quality-market, certified free financial education resources to enhance the classroom experience of students and ensure a better overall understanding of Financial Planning.
- Guest seminars: Schools can arrange guest lectures and seminars by real-life financial experts, willing to share their expertise with the students.
- Covering the real problems: While students are learning about the basics of financial management at school, it is important to equip them with skills relevant to solve real-world financial problems. Thus, emphasis on subjects like moving out, student loans to pay for college, financing a car, getting insurance and paying rent and utility bills, and sustainable living in general, is vital.
To sum up
Good financial education leads to better financial capability. The future of a nation depends on it’s smart and informed spenders. Seeing the current state of affairs, we need a force of financially responsible individuals to lead the economy towards growth. As a nation, it is important to educate the children about the consequences of constantly living in debt or financing unaffordable homes or overspending. The root cause of this issue is the disparity between the money we have and the money we can spend, which rises from this generation’s dependence on external financial help. Now that the root cause has been identified, we can work on imparting the necessary education to youngsters so that they build themselves a better and more responsible world.
