DOMINIC WALSH: Who should be responsible for teaching you about personal finance? - This is Money

Original article available on This is Money.co.uk

Financial Mail's annual student essay contest, run jointly with investment managers Baillie Gifford, asked who should be teaching the nation how to manage its money? The importance of this lesson that has been highlighted by the dramatic financial events of recent years.

Dominic Walsh, now 16, of The Perse Upper School, Cambridge, was the winner of the 13 to 15 age group.

You can read his thought-provoking essay below

We require skills and knowledge in financial matters to make sensible choices with money. The future looks challenging in terms of managing our finances. How can we commit to a student debt for further education when we do not know what the true cost will be?

I believe it is essential we learn how to manage money and avoid bad debt.
Most adults have never been taught about saving, investing, credit or being a smart consumer. Schools should be responsible for teaching all pupils throughout their school careers about personal finance.

Martin Lewis is behind a campaign to make finance education compulsory in schools; he stated that the Government’s funding cost would be ‘relatively small’ and the gain ‘priceless’.

If the government injected a small amount of money into the scheme it would result in more knowledgeable consumers with less mis-selling. Government cannot make personal finance education the responsibility of families, the media, charities and financial institutions, although they all can help.

Families can educate and motivate children to become savers but not all do. Children can save in a piggy bank. Good spending decisions are encouraged by family discussions about needs versus wants. But not all families chat about this. Setting goals, saving for a particular toy for example, helps children learn the value of money.

Parents teach the value of saving rather than spending when they pay us interest on savings or match what we save. Sadly, many families have no spare cash to play generous banker to teach their kids this lesson. It is exciting taking savings and opening your first savings account. Being able to withdraw savings for something is empowering and encourages further saving.

Families educate by involving children when shopping. We learn to plan our own spending when we see parents use coupons, take advantage of offers, check the quality of a product before buying it, research the best price online or save up for something.

We learn about personal finance when we make our own spending decisions. Both good and bad decisions teach us about spending wisely.

Although families can enhance a child’s personal finance education, not all families will do so. This makes personal finance education in schools vital.

The media educate us in personal finance. Newspapers and their online facility explain current financial news. This competition inspired me to research and discover various aspects of personal finance. They advise on best savings rates and point out financial products that are worth investigating. They warn about those that carry hidden risk.
I have certainly learnt that when something looks too good to be true, it probably is.

Television educates. Martin Lewis on the ‘Tonight’ programme worked with teenagers and produced ‘Teen Cash Class’, an excellent survival guide pertinent to our needs. However, we are bombarded with advertisements for quick loans with extortionate interest rates in the small print. The information the media give us is not always impartial whereas finance education in school would be.

The Personal Finance Education Group is a charity helping schools to plan and teach personal finance. PFEG developed ‘My Money Week’ to prepare children for their financial future. I agree with them that it is teachers who know their pupils and who know best how money management can be taught. Financial institutions have also tried to inform young people about financial matters.

What is needed is a planned, structured and well executed personal finance curriculum for all children throughout their school career. It is the responsibility of schools to teach it.

Financial institutions could help resource it. It needs to be pertinent to age and ability, interest and need.

The teaching needs to be monitored to ensure that best practice is shared.

The learning has to be assessed so that pupils, academic or with learning difficulties, build on their knowledge and skills in money matters throughout their school life.

Personal finance lessons would be far from tedious. Experts could be invited into school to talk about money matters; a bank manager to talk about savings and investing, marketing and advertising personnel to talk about their power to influence us, retailers to advise us about being wise shoppers, charity fundraisers to encourage children to consider need versus want.

Activities, depending on the abilities of the pupils, could be running a tuck shop, running a school bank, charity fundraising and Dragon’s Den or Young Apprentice type scenarios.

Some pupils could run portions of a school budget for specific projects, set up mini businesses and follow the stock market with theoretical trades.

It is imperative that we are educated about budgeting, how to read bills and financial statements, the advantages and disadvantages of savings and investments, student finance, good debt and bad debt and where to turn if we need help.

We should learn about mortgages and the financial implications of property ownership.

With life expectancy rising my generation requires unbiased guidance on pensions. We need to understand our rights and responsibilities as consumers. We should debate ethical issues regarding the use of money.

Schools should be responsible for teaching all children about personal finance education. The financially literate are more likely to make good financial decisions.

A comprehensive personal finance education is absolutely vital; at a time when our country is in a recession, these skills could never be more crucial. The government should make it happen and then address financial education for adults too.

Thursday, 1st March 2012

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