This article is part of a series looking into the perception and understanding of money in the UK, with a specific focus on what measures can be taken to build a proactive rather than reactive approach to financial matters.
As an Investment Manager, I have the pleasure of speaking to people on a daily basis about money; primarily discussing potential investment options and how to enable a secure financial future. I am often surprised to hear the response from first-time investors “I simply don’t understand how it all works”.
I have to wonder why such an important subject of protecting one’s finances is not inherently understood by the general public.
It goes without saying that there are many financial and investment concepts that will simply ‘go over the head’ of most people due to the level of complexity, and it would be far too ambitious to expect everyone to understand. However, what I am most concerned by is the lack of understanding of simple notions such as earning a return on your savings, the time-value of a pound and compound interest.
It is clear that the UK has become a very credit-focused society, with household debt doubling over the past decade (as reported by the Centre of Social Justice). Gone are the values held by previous generations where spending within your means and having a ‘nest egg’ was an essential part of life. Modern generations live by the understanding that desirable assets are only an online credit application away.
The education system should be playing a vital role in developing children’s understanding of the importance of money management as part of their preparations for life in ‘the real world’, but it seems that this area is missing.
I hasten to add that this is not a dig at teachers in the UK. My mother is a very experienced primary school teacher in a very poor area of London, so I have a great understanding, respect and appreciation for the work that teachers do. The issue, however, seems to lie deeper and can somewhat be directed at the school curriculum, as well as general perceptions regarding the subject of money.
Thinking back to my own experiences at school, I am not surprised that many of my peers have found themselves in unfortunate financial difficulty in their early adult life and experience the agonising struggle of living pay-cheque to pay-cheque, or even worse, in the red. The number of lessons I recall from my entire school career that centred on saving money or investing? One! The opportunity to learn about such matters were left to those of us who made the choice to study A-levels in financial-related subjects.
With this issue on my mind, in 2012 I attempted to include an element of CSR within my company and targeted specific schools for the opportunity of holding a session for students to explain the importance of saving, interest and simple concepts such as inflation. This attempt was unsuccessful, as teachers did not want an investment company arriving to speak to children. Parents may not approve, since perceptions of investment firms were at a low following the financial crisis. I realised it was not a viable plan and the idea was put to bed.
However, recently this topic has begun to burn a hole in my conscience once again. Why is it that we cannot improve children’s understanding of money in preparation for later life? Why do children learn about specific theories in maths such as Pythagoras and Fibonacci, but not general themes that they can utilise in everyday life? I decided to discuss this further with teachers and see what their views were on the matter.
A Subject Head from a secondary school in Canterbury (preferred to be unnamed) told me:
“not much is done in many schools in terms of practical lessons. Teachers would appreciate the lessons on practical use of money but feel they can’t plan such lessons due to budget restrictions. Students nowadays are very ambitious; they no longer aim to have a career in ‘fun’ jobs and prefer to target professions that offer a secure and well-paid career, so it would definitely be something that would interest them.”
Based on these discussions, I began to explore what steps could be put in place to improve this situation. I found there to be three key areas that need to be addressed:
Improvements in the perception of money and distancing from the adverse connotations due to the financial crisis
If we can isolate the subject of money (investments, savings, credit) from the adversity caused by the financial crisis, teachers and parents may be more willing to approach it without feeling it is a ‘taboo’ subject. Once there is an understanding that making a return on money (even if only to beat inflation) is not necessarily a high-risk or dangerous practice, this may help the integration of these subjects and lead to a greater focus on building a more secure future through personal finance. This will then offset the trends towards credit that are clearly becoming an issue.
Education for teachers around the subject of money and personal finance
Teachers do a fantastic job of teaching academic subjects, but do not necessarily have the understanding of personal finance matters to be able to pass on the required information. If teachers understand and feel comfortable with simple money concepts, they will be less reluctant to teach their students these essential skills.
The school curriculum needs to incorporate practical skills and understanding of money
Useful schemes such as the Money Advice Service are playing an important role in society, but unfortunately have more of a focus on the reactionary methods of helping individuals out of financial difficulties. If the same effort was now put into teaching similar topics in the school curriculum, it may reduce the need for reactionary efforts and improve the quality of life for many adults. Lessons need to be included with the same importance as other PSHE topics such as Sex Education, rather than being left to individual teachers to include these lessons on their own accord.
Like myself, there would be an abundance of investment professionals and companies, willing to give up their time at no cost to help educate schoolchildren in these important subjects. There should be no reason why budget restraints are used as an excuse for key, practical life-skills to be excluded from our educational development in the UK.
With many children witnessing the struggles of poor financial management at home, we should not be shying away from the subject but be taking this as a clear opportunity to educate them in the reasons and preventions of such situations and help improve the lives of our future generations.