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Better financial education is more important than ever

There has been a boom in young people signing up to investing platforms during Covid-19. Historically low interest rates, volatile markets and a pandemic-inspired desire for financial resilience have driven this trading trend.   

But these same young people have emerged from education systems in the UK where the provision of financial education is patchy at best. With an economic and investing landscape filled with jargon and complexities, and social media scams adding new challenges, improving financial literacy is imperative.

There is no consistent financial education slot in the UK’s curricula. In England, if key concepts are covered, it tends to be as part of personal, social, health, and economic (PSHE) and mathematics classes. Some schools offer an excellent package covering the financial fundamentals. Other establishments send financially ignorant pupils out into the world to struggle with basic concepts such as compound interest.    

This can exacerbate socio-economic problems. Children educated in high-performing schools are more likely to have the knowledge to be able to achieve long-term financial stability, while poor provision solidifies and exacerbates poverty in struggling communities. Research by the Financial Times’ financial literacy and inclusion campaign (FLIC) charity has shown that those who need most help with financial education are children from lower income households, girls, and those with special educational needs or disabilities.

There have been many attempts over the years to improve provision. John Penrose, MP for Weston-super-Mare and anti-corruption champion at the Cabinet Office, told Investors’ Chronicle of a new proposal that he hopes will drive real change. 

Penrose thinks that financial education is “currently treated as a Cinderella subject”, with sporadic teaching of saving, pension, mortgage and family budgeting basics. His policy would apply the same principles to PSHE, and by extension financial education, as to safeguarding, whereby a school can’t receive a better overall rating after an inspection than it gets in this area   

Ofsted, the government body responsible for inspections, could fail a school for substandard PSHE provision under this proposal. Penrose said that good performance in other areas “shouldn’t let schools get out of jail” from providing inadequate financial education. His idea will be announced in an upcoming policy paper as part of a package of proposed reforms and he will advocate for the policy change in Parliament.  

Patrick Jenkins, a FLIC trustee and deputy editor of the Financial Times, agrees that serious reform is required. He said that financial illiteracy is an “endemic issue” in the UK, with around one-third of the population defined as financially illiterate using World Bank criteria. FLIC seeks to be an educational hub for the production and dispersal of personal finance content that is “as engaging as possible” for young people. The charity will lobby over the longer term for personal finance to be taught as a core subject.

A central part of FLIC’s programme is the use of social media – a key financial literacy battleground. Online scammers use such platforms to attract the unwary with promises of unbelievable returns, often through high-risk investing in areas such as cryptocurrency and foreign exchange trading. Jenkins said FLIC would inform against online fraud and disinformation, and produce social media content with young people front and centre to attract the charity’s target audience.

Improved financial educational in schools and in other fora will create not just better investors but help set up young people for long-term success. Let us hope that progress can be made.