Opinion: we need massive change to tackle financial illiteracy

We’re rubbish with money. But simply lumping the responsibility on schools won’t solve the problem.

A recent study from the University College London and Cambridge University found that one in three adults are incapable of calculating how much change they are due at the tills.

The research comes amid plenty of talk regarding the role that schools can play in improving the nation’s understanding of financial matters.

Even the Archbishop of Canterbury has been at it.

The Just Finance Foundation, a charity founded by the Archbishop which provides training and resources for teachers around financial education, has called for financial skills to be taught in primary schools.

It has written to the Government to urge a rebalancing of Personal, Social, Health Education (PSHE) lessons so that there is less of a focus on sex and relationships and more of a focus on money.

It wrote: “Financial education is not the only important component of PSHE, but it is one that merits much greater emphasis as we seek to build a fairer society in which all children and young people have the opportunity to flourish.”

Nigel Green, the founder of the deVere Group went one further, calling for personal finance to be a standalone subject in school, alongside the likes of English and Science.

He said: “Financial literacy can equip young people with the confidence, skills and know-how to obtain future financial freedom for themselves and their families – and this is why we should all support the growing calls for personal finance to be a standalone subject in schools.”

This is all very well intentioned, I have no doubt. But it’s not going to solve the problem.

Our financial literacy is appalling

I’m certainly not denying there is a serious issue with financial literacy in the UK.

In 2016 the Organisation for Economic Cooperation and Development (OECD) looked at financial literacy in 30 nations; the UK finished just 15th on the list, below the likes of Estonia and Latvia.

Digging into the report throws up some terrifying results.

While around two-thirds of respondents worldwide understood what would happen to the purchasing power of their money if inflation stayed at the same rate for a year, this dropped to just 38% in the UK.

While most people worldwide carefully consider their purchases (around 80%), things are a little different in the UK.

Just 69% of us think carefully before spending money, ahead of only Poland and Croatia.

Less than half of us (45%) set long-term financial goals and actually strive to achieve them as well.

Perhaps most troubling of all is the fact that not only do many of us have limited financial knowledge, but we mistakenly believe we're actually on top of things.

Just 12% of UK respondents reported having below average financial knowledge in the OECD’s study, with 32% saying they have above average understanding of money matters.

To me, this is a perfect example of the deeper-lying problems we have when it comes to money.

School lessons will only go so far

I don’t doubt that there should be some element of financial education at school.

Looking back to my own time at school, I don’t remember money ever really being mentioned.

The only thing we had was HSBC coming in to encourage us all to open bank accounts with them when we were in our early teens.

There was certainly never a mention of a mortgage, a credit card, compound interest or anything else that might have proven useful once we got older.

That absolutely should change – the fundamentals of finance should be covered in schools, no question, though the idea of money as a standalone subject seems bonkers to me.

We need a cultural change though

But let’s be honest, an hour a week on financial fundamentals will only make the small difference to our financial literacy as a nation.

We need to undergo a much more fundamental cultural change if things are to improve, and that starts with getting past the idea that money isn’t something you ever talk about.

When I first became a journalist, I started working on a mortgage magazine aimed at brokers.

No, it wasn’t what I dreamed of doing when I was studying but hey it was a job.

I remember the reactions of my friends though – none of them could think of anything worse than having to think or write about money every day.

I had some sympathy with that viewpoint.

It was only once we got older and started looking to buy homes that attitudes started to change and suddenly having a bit of an understanding about how mortgages worked was seen as useful.

That’s the point: as a nation, we don’t worry about what any of this stuff means until we need to know.

It’s a problem for another day, a thing that other people think about. We’d rather talk about sex than money.

It’s a crazy attitude and it’s one that has to change. School lessons are definitely needed, but they won’t change that attitude.

We need to break down the barriers about talking about money inside AND outside the classroom.

We can’t constantly look to teachers to make up for our own shortcomings as a society.

Parents and grandparents need to talk to their kids much more openly about the importance of money in every single thing they do.

A great example is what Felicity Hannah did at Christmas, by involving money in their Christmas lists rather than relying on Santa and his elves to sort everything.

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Financial firms can help too

There’s an important role for businesses to play in this as well.

Make no mistake about it, part of the reason so many of us glaze over when it comes to money is the way that it is presented to us – a maze of jargon and nonsense acronyms.

It makes it far easier to simply sign up to whatever we are being sold than actually go through the small print and force ourselves to understand what we are signing up for.

This has to change. Firms need to be compelled to explain how their products and services work in clear, concise English.

Palming off financial education to teachers is the easy answer, but alone it isn’t the right one.

If learning about money ends with the school day, then we are simply condemning the next generation to make the same mistakes we have.

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