Schools need to teach real-world, better financial literacy to students, to prepare them for better spending and borrowing in a worsening cost-of-living crisis
Over the past few weeks, there’s been widespread talk of Rishi Sunak’s upcoming plans to make mathematics lessons compulsory until the age of eighteen. Whilst the responses to the idea have been mixed – with some claiming the move will be traumatising for teens and others claiming they would be more financially confident if they had been taught maths until the age of eighteen – the proposed changes raise important talking points about how we learn about financial literacy.
If Sunak’s plans are to be more focused on financial independence and financial freedom, then in my view, the change is a welcome one.
Sunak’s plans are to be more focused on financial independence and financial freedom
In fact, I argue that financial literacy lessons – not maths lessons specifically – should be compulsory in all schools at all levels. Not just one-off sessions. The world of finance is a vast and expansive one, and at some point or another, we either have been or will be exposed to financial terminology or processes that we don’t understand.
Whether that happens when applying for a mortgage, loan, or credit card, or trying to organise our own tax returns, compulsory financial lessons will help the general population to be more savvy and knowledgeable when it comes to their finances.
There is a basic lack of understanding of common financial processes
When debates arise around whether real-world lessons should be taught in schools, many experts argue that the school education system doesn’t need to teach pupils about them because the system is designed to develop transferable skills. Whilst there may be an argument within that (and the need to be able to figure things out independently) as a society we have a duty to give children both academic and practical educational lessons.
Yes, we need to teach pupils about advanced Pythagoras theorem and algebra if they want to study mathematics at university level, but it’s also important for them to know and understand the risks associated with taking out a payday loan, or what 64% APR means when it comes to applying for a credit card.
It’s also important for them to know and understand the risks associated with taking out a payday loan, or what 64% APR means when it comes to applying for a credit card
Overall, there is a general lack of understanding about financial processes within our society, and schools should have a responsibility to teach children something that will affect them in their everyday life.
Without knowledge or education about finances, we’re open to exploitation
When we think about the health, safety, and wellbeing of members of our society, the government takes a level of responsibility to ensure the safeguarding of citizens.
To put this into context, think about the numerous anti-smoking, anti-gambling, and drink-aware campaigns that governments around the world roll out to citizens to ensure they ‘know their limits’ and raise awareness of the dangers of recreational activities. But what about when it comes to spending and borrowing?
There is clearly a lack of knowledge and awareness around the dangers of borrowing too much money, maxing out credit cards, and damaging our credit scores. This is becoming even more apparent with the Buy Now Pay Later trend that many financially vulnerable citizens engage with, namely students and those on lower incomes.
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If we were all taught the drawbacks and benefits of borrowing at school, then we might think twice about applying for finance or knowing where to go if we need support in dealing with our finances.
Ultimately, if you don’t have someone to educate you on the dangers that come with borrowing credit, then you’re more open and vulnerable to being exploited by them. On the flip side, if you don’t know how to invest, then you might miss out on building personal wealth.
Financial literacy can help prevent a perpetual cycle of poverty
For the most part, young people learn financial literacy and personal finance skills from their parents, both explicitly and subconsciously. If a parent is struggling to deal with finances themselves, there may not be time or even a conversation about how children should approach their finances as they become adults.
This leads to less awareness and knowledge of financial processes and can result in ill-informed decisions, again, perpetuating the cycle of poverty from generation to generation. If schools had a more hands-on approach to teaching children about personal finance, making it a regular lesson in their curriculum (say one hour per week) then there wouldn’t be a dependence on children to ask their parents about financial matters, and they could gain access to reputable, trustworthy, independent financial lessons from industry experts.
As a society, it’s our duty to create independent, confident citizens of the future, and that mission starts with financial literacy.
This piece was written by Roger James Hamilton, founder of Genius Group
