Laetitia Glossop was the Conservative candidate for North Durham at the 2015 general election.
With the start of the new academic year comes, as ever, much discussion about tuition fees and the level of debt university students may expect to incur over the course of their studies.
According to the Student Loans Company report in June 2016, this amounted to £11.8 billion in the financial year 2015-2016 – a not inconsequential amount by any standards.
However, this is only one aspect of a much broader, indeed universal, issue of finance for young people about which far less is discussed: how sufficiently equipped with the necessary financial “life skills” and practical understanding are young people today, whether embarking on university degrees, pursuing apprenticeships, or on any other path adulthood and the workforce?
The last government made progress in this area by making financial education compulsory in secondary schools. However, it is unclear to what extent this has been adopted by academies and free schools.
In an increasingly complex world of consumer financial services, of which all will be customers, this is about more than a rudimentary understanding of the good practices of financial budgeting or how to use a chip and pin card (in my day it was how to write a cheque!).
This is about properly preparing young people for a world in which it is both possible and important to make sound financial decisions. A world, however, which is also fraught with opportunities to do the opposite and in which there are many mixed messages.
Take debt, for example; on the one hand the vast majority of those going to university this autumn will be expected to undertake significant levels of debt as the price to pay for working to attain the route to their professional lives and the futures they aspire to. Similarly, it is culturally endemic in Britain to aspire to own your own home – via, in the overwhelming majority of cases, a substantial mortgage.
In such ways, young people are taught that borrowing is not an uncustomary financial status and nor should it be intrinsically avoided. All of which is true, up to a point. However this is a rather binary approach to the myriad complex credit products available within financial services.
The difference in the nature of debt offerings is a natural educational starting point; mortgage debt versus credit card for example. Both are very likely, if not assumed, to play a part in people’s lives. As City fund manager, turned financial journalist and author, Stewart Cowley, says in his book Man vs Money, “We all borrow money some point in our lives. It might start with the occasional and fleeting overdraft, develop into a credit card, escalate into a loan for a car and before you know it you are hooked on mortgage payments”.
In such a world, APR and its potentially immense impact on short-term financial decisions, is a particularly important aspect of financial life and should be widely taught in schools so that students can make informed, responsible decisions and understand the consequences of not repaying in full or only making minimum payments each month.
Similarly, credit scores; what they are, the actions which impact on your score, and why this is important for individuals’ long term credit worthiness and financial security.
If the role of schools and our national curriculum is not only to nurture our future generations of Baroness Bradys or Sir Richard Bransons, but also fundamentally to equip young people with the basic know-how that enables them to make the best life choices they possibly can, then this is important knowledge to impart.
It is dangerous to ignore the many opportunities available for debt to be an extremely detrimental element to people’s lives, be they young or old. In a world of, at best, easy access to credit cards with tempting offers, and at worst payday loan companies, the difference is distinct. Regardless of background, everyone in this country deserves the opportunity and information to make the best choices for themselves – as Theresa May stated on the steps of Downing Street back in July.
In the digital age, with access to financial services available via apps and mobile technology, this issue is more consequential than ever. If inclusion on the National Curriculum has yet to adequately address this agenda, what will?
Making personal finance an examined subject, thus a factor in school performance as measured by Ofsted, is one forcible strategy. The natural home is within maths GCSE, with the added benefit of demonstrating the practical relevance of maths to
less numerically gifted students.
Finally, where schools fear a potential skills gap, this is an excellent opportunity for the financial services sector to demonstrate its value to society by offering outside expertise.