From: The Guardian
Young people
are under intense pressure to take out store cards and rack up debt to
buy gadgets and appear rich, according to teachers who took part in an
in-depth study into what youngsters understand about finance.
The study, The Ticking Time Bomb of Generation Debt, also found that
education about money has stalled, with many secondary schools
side-stepping changes introduced to the national curriculum in 2014. It
was commissioned by Young Money, formerly the Personal Finance Education
Group.
Teachers said they were particularly concerned about young people
finding themselves in high levels of debt “made worse by extortionate
interest rates”. It cited pressure from celebrities, reality television
and social media.
One teacher told researchers: “The pressure to get into debt is
horrendous: in a capitalist society corporations spend billions
advertising their products, while the media portrays being rich as being
cool.”
Another cited television programmes such as MTV Cribs, which features
tours of the mansions of celebrities, and My Super Sweet 16, about
teens who “expect and will only accept the absolute best”, as well as
social media sites such as Facebook. The study found:
• Students were opening store cards and building up significant debt at a high level of interest.
• A sharp increase in the number of older students targeted for store cards, new mobile phone tariffs and download charges.
• Tailored marketing to attract younger consumers and encourage them to spend more.
• Accusations that young people are not fully educated on “complex and potentially damaging financial products”.
The report was issued on the same day that the Financial Conduct
Authority published its Future Approach to Consumers, which warned that
companies need to do more to protect the vulnerable, and that many
people do not make economically rational decisions on their finances.
“Many young consumers have never experienced anything other than
near-zero interest rates … With student loan debt and the relative ease
of accessing credit, many may come to see high levels of debt as the
norm,” the FCA says.
In September 2014, financial education was made a component within the “citizenship” element of the national curriculum
at key stage 3 and 4. At the time, the government said its aim was “to
enable students to manage their money on a day-to-day basis, and plan
for future financial needs”.
But Russell Winnard, a former teacher who is now head of programmes
and services at Young Money, says the number of schools teaching pupils
about money has stayed worryingly low.
“It is compulsory in every secondary school, though that does not
apply to academies and free schools. Around 35%-45% of schools were
actually delivering financial education in 2014. Two years on and we
estimate it’s still only 40% doing so.”
Why are schools ignoring the curriculum requirements? Winnard says it
may, in part, be down to the under-confidence of teachers. “The mandate
to teach personal finance education hasn’t really worked. We need
teachers to be more comfortable and confident enough to deliver high
quality financial education. There is a need for much more training for
teachers.”
But is personal finance a huge turn-off for young adults, and
squeezing precious time off the curriculum that could be devoted to
other matters?
Not so, according to Hannah McWattie, head of maths at Samuel Ward
Academy in Haverhill, Suffolk, which is aiming to be a centre of
excellence in personal finance education.
“We were doing elements of finance in maths and in citizenship. But
it was the 15- to 16-year-olds who said they wanted more information
about loans, mortgages, interest rates and credit cards. Some teachers
may be reluctant to tackle the subject because it is personal and
emotive, and we always steer clear of personal circumstances.
“Most students find the terminology of finance very confusing. They
don’t, for example, understand the difference between a credit card and a
debit card, and why should they?”
At The Priory Academy in Lincoln, maths teacher Jim Hardy is working
on increasing the level of personal finance education, particularly in
the school’s sixth form, after feedback from ex-pupils now at university
suggested that a huge number wish they had left school with more
financial awareness.
“Student engagement has been fantastic,” says Hardy. “This week, for
example, students showed genuine interest in working out take-home
salaries, having first to calculate a range of deductibles. Many were
amazed at the amount of tax a millionaire has to pay!
“I left school having had little financial education, but things have
changed a great deal. University fees are much higher, mortgage
repayments or rent all demand a larger percentage of monthly wages,
there is little interest gained for those with savings, and so it would
appear prudent to educate all young people in personal finance.”
Young Money receives financing from a variety of sources including
Barclays, HSBC and JP Morgan. So is there a risk that pupils are being
tutored into taking an approach to money that endorses the world-view of
the banks? “It is certainly not about individual financial products.
It’s all about improving understanding so young adults are in a better
position to make choices,” says Winnard.
Often, it is those from middle-income homes that have a worse
understanding about money. “Disadvantaged households see cash
physically, and have a better fundamental understanding about its value,
what it’s used for and where it comes from. In more affluent homes,
children see money less. The concept of value, and where the money comes
from, is less clear,” Winnard says.
One teacher told the study that parents, too, have poor money skills.
“Unfortunately, I suspect many are in debt and don’t necessarily have
the skills to help young people avoid the same mistakes. External
support for both parents and young people is necessary to break this
cycle.”
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Personal Finance