Gavin Shreeve is Chief Executive of the ifs School of Finance
There is a burning issue with which the
Tories could make hay in a way that is both traditional yet Cameronian.
It is the policy announced by George Osborne the other week that if elected to
Government, financial education will be taught in all schools. However
it is crucial that this doesn’t go the way of so many eye-catching
initiatives that create headlines yet fizzle out before the hard detail
This issue is indeed reaching crisis
proportions. The UK’s consumer debt mountain now breaches the £1.3
trillion mark and growing at the rate of £1m every four minutes. This
figure translates to an average household debt in the UK of an astonishing
£9,000 (excluding mortgages).
The Citizens Advice Bureau recently released
figures to show that more than 5,300 people were seeking their advice
about debt related problems every day. Government statistics released
this month confirm there have been a record number of insolvencies in
the last quarter. The implications for society at large are obvious
– at the core of almost all of our social problems is the mismanagement
of money due to financial ignorance.
Consumers cannot be expected to make
appropriate choices about their personal finances when surveys show
that 79% of people do not know what an APR is. Amazingly 25% have no
idea how much they spend in a week and 26% have no idea of their monthly
Furthermore, some 15% of 18-24 year-olds think an ISA is an iPod accessory
while 19% of adults hope to improve their standard of living in retirement
by winning the lottery.
The ability to manage personal finances
is a crucial life skill, no matter what your income, class, or background.
If future generations are better educated about personal finance, most
of the above problems will be significantly reduced.
The Building Society Association recently
“…teaching young people how to manage their money
effectively is as important as drugs or sex education.”
Other research has suggested that a majority of parents would rather
their children were taught about personal finance than a range of traditional
subjects such as History and Geography.
An independent longitudinal study by the University of Manchester into
the effectiveness of financial education qualifications confirmed that
95% of students were better able to manage their finances as a result
of taking our Certificate In Financial Studies (an AS level-equivalent
The course, carrying full UCAS tariff, is being taken at schools and
colleges across the UK in rapidly increasing numbers. Many students
taking the course have changed to a different bank account yielding
a better return. Whilst others purchased additional ‘non-traditional’
products, such as ISAs or investment bonds.
There was an increase in the number of
students owning multiple financial products and a decrease in the proportion
of students who owned one or more credit or store cards.
Whilst the course appears to change behaviour
by ensuring borrowing is affordable, increasing saving and ensuring
students are generally able to manage their money, the course is not
available at all schools and colleges in the UK. If all teenagers had
the opportunity to study such courses, the improvements would be far
more widespread. The result being a seismic shift in the financial behaviour
of society at large.
When George Osborne made his announcement
on Financial Education, he said:
ifs School of Finance and others are doing excellent
work to increase financial literacy. But government could and should
be doing much more to promote financial literacy teaching in our schools.”
The ifs welcomes this statement
of intent but hope that as these plans develop, the Conservatives will
ensure financial education is a dedicated standalone subject. We need
to avoid it being bolted on to another subject such as maths or citizenship
as the current Government intend.
If we are serious about improving levels
of financial capability, we need to dramatically improve the financial
education of the nation – and all the available evidence suggests
the best way to do so is via a standalone qualification in personal