“Two-thirds of people in the UK feel too confused to make the right choices about their money and more than a third say they don‘t have the right skills to properly manage their cash… We believe that financial education is a long term solution to the national problem of irresponsible borrowing and personal insolvency.”
These are some of the first lines of a report published in December of last year by the All-Party Parliamentary Group on Financial Education for Young People.
This is a staggering, and worrying, reality. It is not however, a new one. A 2006 FSA report analysing the quality, or otherwise, of Personal Finance education began and ended in very much the same vein.
This subject has been long been characterised by strong rhetoric but that rhetoric has failed to translate into change. After all how can we expect people to take more responsibility for their financial future if you don’t give them the tools to do so? This time it is imperative that change is pushed through.
A combination of factors are conspiring to make now an auspicious time to act boldly; firstly, the State is reviewing the English curriculum for when rules change in 2014, this provides the opportunity for the role of financial education to be increased; secondly the wider landscape is in a period of flux with quasi-independent organisations, such as the admirable and influential Personal Finance Education Group and the Money Advice Service suffering from government budget cuts and evolving remits. Thirdly endorsement and support from the Prime Minister, a petition signed by 118,844 concerned individuals and the 225 MP members of the APPG, are combining to highlight and add credence to the issue.
The Government should not however act in isolation; the financial services industry and communities will need to play a key role in funding, sustaining and bringing any recommendations to life. The industry has already set a good example with initiatives such as the Association of Financial Mutuals Fun To Save, the aforementioned PFEG and Money in Mind amongst many others, but without uniting with the full weight of government, real and lasting change will be out of reach.
Education will benefit not only customers but also financial services providers, who will have a happier and more informed customer base. As way of example, the British insurance industry is one of this country’s crown jewels – its structural significance to our day to day lives and to the UK economy is immense. However this position is belied by the criticism at times aimed by quarters of the general public. The ‘man on the street’ can on occasion be heard dismissing insurance as an endless pit into which much money pours but from which little is ever disbursed. Although specific cases can highlight isolated issues, this commonly held misapprehension is very much based on misunderstanding.
Change will be far more effective if industry can act collectively as opposed to in isolation – for example, more companies could help to drive forward initiatives like PFEG’s My Money Week. Sadly the industry has in the past tried this approach and run into problems, for example CEO of Lifesearch Tom Baigrie’s admirable 2008 plan for a large scale advertising campaign to promote the necessity of protection insurance fell afoul of funding and disunity.
A combination of government and unified industry support will give young people the tools they need to make sure their finances are in good order, especially in these tough times; for their sake, our sake, and for the sake of future generations who will have to pick up the pieces.