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09 Dec 2021
by Maggie Williams

REBA’s Inside Track: young people’s financial education must be about the future, not the past

How do we create a financially literate workforce for the future? What are the skills and knowledge that children need for their life at work – and who is best placed to provide them?

 

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According to research from IPSOS MORI and the Financial Times, 29% of 16–24-year-olds are not considered financially literate, and 90% of individuals said that they had learned ‘nothing at all’ or ‘not very much’ about finance in school. Clearly there is significant room for improvement, so the call often goes up for better financial education in schools as the panacea.  

But are school teachers really the best candidates for improving financial literacy?  

Younger workers will experience a financial and work landscape very different from that of their parents, or even their teachers. The end of cash (hastened by Covid-19), digital currencies, online share trading platforms, open banking, merged saving models and a host of other innovations are likely to be central to the financial needs and literacy of tomorrow’s workforce.

From everyday financial management (what we used to call banking) through to retirement saving (what we used to call pensions), personal finance is being overrun with new ideas. Credit cards, mortgages, pensions, ISAs, managing a monthly income….how many of these will still be a reality by the time today’s primary school children are established in the workforce?  And while I’d argue that financial basics such as managing tax and understanding compound interest will be as important as ever, they will be joined by other basics such as spotting scams and avoiding addiction to some online platforms.

The way that we earn and spend is changing. The evolution of salary-on-demand services could completely rethink the way that our money is earned and managed. Major retailers will no longer have tills in their shops that keep track of how much we’ve spent. We will become increasingly dependent on apps and data to help us keep track of our finances.

Some of these ideas feel threatening or financially risky in principle, but they are a reality. Assuming they are properly regulated, like social media, perhaps it is better to show young people how to think about them safely and intelligently, rather than deny their existence.

We are also seeing ever greater economic divergence among younger workers, driven by skills gaps and changing workplace practices. Covid-19 showed that many younger workers still begin their working lives in low-paid sectors such as hospitality. But there are also those with highly attractive, niche digital skills that can command more money in their first job than I have ever earned in a single role. Financial literacy and awareness needs to cater to both ends of the spectrum.

Is it realistic for teachers to meet all these needs in school and prepare children for this radically different future, alongside other teaching commitments? In theory, financial literacy forms part of the PHSE curriculum for secondary schools, but there is no guarantee that it will be taught to a good standard – or even that teachers feel comfortable delivering it at all.

Looking more broadly, you could argue that mandating wellbeing in schools also doesn’t have a great track record: physical education is compulsory in all UK primary and secondary schools – but by 11 years old, 21% of UK children are obese. Is that a failure of the physical education on offer, or is it a sign that schools cannot shift standards on their own? Probably it’s a bit of both.

There is also the issue of inclusivity and sensitivity – while many children will come from financially stable or affluent homes, there will also be those accessing food banks and for whom money is a constant source of conflict and struggle. According to government figures, there are 4.2 million children living in poverty in the UK – the Child Poverty Action Group estimates that this is nine children in every class of 30. That requires significant sensitivity when teaching financial literacy, even if developing financial knowledge is a route to improving future prospects.

There are many teachers who already balance these factors exceptionally well and present financial literacy in creative and inspiring ways. Just this week Interactive Investor announced the results of its Personal Finance Teacher of the Year Award. But there is not enough consistency or availability of suitable finance teachers. And, many schools simply have bigger fish to fry, if they are to remain in favour with Ofsted.

So, if not (just) teachers, then who, or what?

Like the workplace, schools should be a safe environment, set up for learning. That opens the way for others – from specialist external education providers, to financial services firms and employers themselves – to get involved.

If employers want a financially literate workforce for the future, they need to play a part in creating it. That could be in-person or through funding technology, social media and more to support children’s financial literacy. It could be delivered through school outreach, or as part of a family learning benefits package. But what it delivers must be related to children’s financial future and delivered to suit the way they absorb information, not just another talk on mortgages and pensions.  

The author is Maggie Williams, content director at REBA.

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