Most adult financial habits are established by the age of 7 through the service of money and pensions. The CSJ believes that a radical change is needed in the classroom to solve the problem. Primary schools should be required to provide financial management lessons to pupils, according to a new report on the alarming state of financial education in modern Britain.
Commissioned by the Center for Social Justice (CSJ) in partnership with Lowell, and endorsed by Education Select Committee Chairman Robert Halfon, MP, the report finds that 14 million adults with financial problems believe low Financial management skills have contributed to their fate. With most adult financial habits set at the age of 7 in the service of money and pensions, CSJ believes a step change is needed in the classroom to address the issue.
Other report findings On the Money: A roadmap for lifelong financial learningwhich involved a nationally representative poll of 4,000 adults by Opinium, include:
- Nearly half of the population (44%) believe that better financial education would help improve their financial situation;
- More than two-thirds (68%) of young people (aged 18-34) who have experienced financial problems believe that poor money management skills contributed to it;
- Half of Britons failed a financial literacy test organized by the OECD in 2016, placing Britain well below France, Norway and Austria, and just above Thailand and from Albania
- Twenty-four million adults say they are unsure about managing their day-to-day money;
- Only one in three children receive financial education in primary school, but the disparities in financial literacy between children of different socio-economic backgrounds are already pronounced at the age of 11;
- The introduction of financial education into the national curriculum in 2014 in secondary schools in England has not meant that all pupils receive adequate financial education; two-thirds of teachers believe that students leave school with a low level of financial understanding.
As the internet has become an integral part of children’s lives from an early age, with almost all children between the ages of 5 and 15 going online in 2020, the report found that the lack of financial knowledge among children poses unprecedented risks. For people aged 8 to 11, digital spending on online marketplaces and mobile games has reached record levels and, according to the National Audit Office, up to 55,000 children aged 11 to 16 have turned out be “problem gamblers”, with another 85,000 at risk. .
Poor financial education during the school years puts young adults at risk, especially in the midst of a rapidly changing financial market where new risks are constantly emerging. The survey heard that one in eight young adults who took out a “buy now, pay later” credit agreement ended up being contacted by a debt collector.
The report also found that learning to manage money is a particular challenge for children from the most disadvantaged backgrounds. The CSJ presents evidence showing that children from low-income backgrounds are less likely to receive pocket money and therefore have fewer opportunities to develop positive spending and saving habits. The accelerated move towards a cashless society, combined with fewer poor children having online bank accounts, has also reduced opportunities to practice money management from an early age.
The CSJ cites evidence showing deep geographic disparities in financial literacy.
The survey learned that 76% of schools with children most in need of financial education, as defined by the charity MyBnk, are in areas of high deprivation. The increased levels of financial vulnerability in the Midlands and North of England following the pandemic, as revealed by Lowell and the Urban Institute’s Financial Vulnerability Index, suggests the additional need for better financial education in key areas of the government’s upgrading program.
The CSJ recommends that financial management courses be added to the national primary school curriculum. There should be a legal requirement for such courses for secondary school youth (via PSHE). Current arrangements mean that financial education is, according to the report, “woefully absent” for the most disadvantaged.
The report calls for dormant assets in banks, insurance, pensions and building societies – the scope of which will soon be widened to raise an additional £880million – to meet the cost of rolling out financial education for all pupils aged 7 to 11, which is estimated at £32 million a year. By comparison, one estimate found that lack of financial education was costing the UK up to £3.4billion a year.
There are 28 recommendations in the report, including:
- A new legal requirement requiring students to take at least three “experiential” financial learning courses throughout their school career;
- A new “whole family” approach to financial education, recognizing the role of parents and guardians in developing financial literacy, using community infrastructure such as Family Hubs;
- New funding for people leaving care and disadvantaged young adults to participate in “just in time” financial education programs to reduce instances of homelessness due to rent arrears among this vulnerable group;
- Embedding adult financial education as part of the government’s £560m adult numeracy programme, Multiply;
- Better promotion of employers’ financial wellness policies to leverage “teachable moments” throughout people’s working lives and promote the Help to Save program to increase adoption by those who are eligible ;
- The completion of the social protection reforms initiated in 2012 by the deployment of “Universal Support”, an integration program that includes support for the most vulnerable in society to develop digital and financial skills.
MP Robert Halfon, chairman of the education select committee, said: “The ‘soft skills’ that are too often denigrated are in fact not soft at all. Indeed, these are skills for life.
“This report shows that those who leave school without effective financial education are at high risk of financial abuse, fraud and debt. Yet today, only one in three children currently receive some form of financial education in elementary school.
“We need to be bolder – especially, adding financial education to the primary school curriculum in PHSE lessons where money management remains absent in England. Adults of all ages also need opportunities to develop essential financial skills throughout their lives, whether in the workplace, in continuing education or through the welfare system.
“This new financial education offer is necessary to strengthen the resilience of our society and our economy which cushions cost of living crises when they arise.
“Preparing our young people for a very demanding world and workplace means taking skills seriously. And financial management skills are no exception.
Joe Shalam, Director of Policy at CSJsaid: “When Martin Lewis says he has run out of tools for households struggling to make ends meet, any suggestion that financial education alone is the answer to people’s financial problems would be rightly title dismissed as unrealistic.
“But it would be equally myopic to overlook the important role that financial literacy, skills, and decision-making play in helping families achieve long-term financial well-being.
“Too many children are leaving school without the basics, while young adults face a rapidly changing world of financial risk. Our report provides the government with a roadmap to improve lifelong financial education. life, which we hope ministers will adopt as part of the welcome ambitions of building a highly skilled economy.
John Pears, British Managing Director of Lowell, said: “With the rising cost of living hitting home, financial literacy would be a significant hurdle. Unfortunately, we’re just not good enough at it in this country.
Our own clients have told us how unprepared they feel to deal with debt. Lack of financial literacy and budgeting skills creates spirals of debt that are hard to break and have a lasting impact, both individually and on our economy.
We need to envision a step change, over the course of people’s lifetimes, to ensure that everyone has the skills to manage their money and navigate modern financial products. We need to build the appropriate financial resilience in the UK.
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