Compulsory Consumer Finance Education Discussion

boatie_2

As someone who has organised PSHE (Personal, Social and Health Education) in a secondary comprehensive and has organised and delivered personal finance - the local Nat West was very helpful - I feel there is a definite need for personal finance education. There are a few problems. In PSHE, it will inevitably be bundled together with many other topics may or may not be important, from sex education to sun protection, cyberbullying and how to deal with changing friendships. There will be time pressure.

Simply having a timetabled Personal Finance lesson or two will not change much. Many lessons in financial management come through life and experience of providing for yourself or being in debt. General attitudes to money are also shaped by personality and childhood experiences and a few sessions in school, though worthwhile, will not overcome this.

Rachel_Hughes

We definitely need this in schools to teach children that you can't have everything you want instantly by using a credit card or borrowing money and getting into debt - you have to save up for expensive things you want to buy. Children also need a reality check on the sort of salary you get paid in a real job because they just think in terms of footballers salaries and think if you get less than them it isn't a lot. They need to be taught pay your mortgage/rent and utility bills first before looking at what you would like!!! how to tighten their belts and cut back and set a realistic budget based on what they earn!! sorry to ramble but please martin these are serious points that children need to know.

Tedmill

As a financial adviser, I impress upon clients the mnemonic PEPSI as a guide to finacial planning:

P = Protection, make sure that if anything happens to you, your liabilities will be cleared and your dependents taken care of with Life Assurance incorporating Critical Illness Cover.
E = Earnings/Expenditure, protect your ability to pay your regular outgoings, including food and leisure spending with Permanent Health Insurance. Include Private Medical Insurance as and when you can afford it to ensure a speedy return to work.
P = Pension, start early and keep it going. Even if you start at £25 to £50. Half your age is the percentage of your gross earnings you need to aim for.
S = Savings, that is short term money set aside to pay for future purchases, rather than use a card or "easy payment" plan, ideally using an ISA (start with a Cash ISA in case you need access).
I = Investment, not savings, investment is long term use of money that will not be needed within 5 - 10 years to build up a solid financial base for later. Be prepared for values to go up and down, and don't panic on either.

Obviously, someone doing a Saturday/vacation job, or just starting a first job will not be able to afford most of these, but getting the basic plan into their heads will enable them to budget as soon as they start to accumulate responsibilities.

And tell them how much children cost, in case they want to start families!

CarefullwithMoney

I think the children also need to taught how to interpret TV (and other) adverts. 50% off, Free this etc - usually have a catch somewhere - you have to buy something or subscribe - and this only becomes apparent in the small print.

Mobile phone charges are a prime example - I have given up trying to have one on contract as the small print is too onerous.

And don't start me on the current adverts for "Free" Sky HD on XBox....

Teach the children to read beyond the headlines

JonR1

We were just discussing this the other day. Why not teach kids maths by calculating how much capital and interest a person pays: eg to buy a £150 XBox now on a credit card and repay £20 per month, compared to how long they would have to save at £20 per month to buy the XBox outright.

coolcb

I apologise if I over simplify the matter, but it is pure mathematics:

Don't spend more than you earn or are capable of earning.

Borrowing to invest is logical, some risks are worth taking; however borrowing to keep up with the Jones' or throw it all up on Sunday morning is ludicrious.

quickstepqueen

When my stepchildren came to stay with me this was always something I introduced in our everyday lives. I'd take them shopping and show them the reality of shopping by comparing prices and sizes of packets. By checking ingredients lists so that whilst it might be a cheaper product it isn't always any better a product.

I also gave them a sort of "living independent test." I pretended that they would be living in a 1 bedroom flat at 18yrs of age and in work and asked them first to say where their money would go e.g. elec, gas and then to guess how much money they'd have to pay on each of those categories. I then worked through their lists with them and we chatted about it. Looking at income and expenditure so they could see that whilst living alone sounds a great idea (and believe me they couldn't wait to leave their mums!) they might not necessarily be able to party each week.

2 years later my youngest stepson at just 16yrs moved out of home to attend a dance academy and now flatshares. He has since told me that he couldn't have lived alone without all the advice and the "tests" that I gave him. He saves a bit each week in envelopes so can see where the money goes and it's then there for all his bills.

In this day and age so many parents wages are paid direct into the bank. I learned about finance from seeing my dad bring home the weekly pay packet and my mum dividing it all up into different envelopes, keeping a tally in a little notebook. I could then clearly see where the money went and that when a bill came in there was money available.

Children need to be taught good old fashioned housekeeping. That it's not financially a great idea to just stick the washing machine on for 1 pair of jeans, that bulk cooking food and freezing saves money, that there are cheaper and effective ways of cleaning.

My other stepson however wasn't great at basic maths at school and found it hard to concentrate. It's amazing the number of times he's rung asking for money to go out with when he's in full time work. As much as we try and guide him about finances it just won't go in. He even flatshared for a while and despite us giving him tips on saving so that bills wouldn't scare him he still needed us to bail him out. (He was only 17 at the time and it was an important learning curve - he couldn't afford to party and live independently!!)

Have people who have been in major debt talk to students to show them the effect being in serious debt can have. The knock-on effects. My stepchildren did PSE in their Scottish secondary school and I would highly recommend it but I do think that parents need to back it up at home. If parents are in debt tell the the children, they're not stupid and it will stop them pestering for this and that. It's not nice being in debt and having to forego social events and stop present buying etc so go Martin...I'm behind you on this one 100%

maiasopohie

My son age 7 , decided he wanted a laptop!
I said he would have to save up, so for 3 years didnt spend a penny for his £1 per week pocket money. How amazing is that!

With a little birthday and Xmas money presents, he finally bought himself a laptop for £500.

Kids can only find out the value of money if we parents teach them.

sharrison01

Hi Martin,

I'm totally behind your efforts to teach teenagers and children about banking and working your way through the multitude of jargon for financial products.

However, an effective way and the way in which I was taught is for banks to go to schools and talk to the students. When I was 13, we had our local branch of The Woolwich come to explain to us about keeping a bank account, writing cheques, interest rates etc and as a student, you see this as more important because it is not your teacher going on again but is instead a "special guest."

It also worked for the bank because they gave us all a "fun pack" including application forms and information about their children's savings account and 14 years later I still have an account with them (Barclays).

In making basic bank skills part of the curriculum, teachers will inevitably be reducing the time spent teaching other things and there is no guarantee of the students taking it in but a representative from a local bank might help to inform youngsters. Furthermore, the government would probably own most of the bank anyway so it would not be difficult to implement!!!

jamiebrady3

dots_thots wrote: »

I'm glad this has come up because our system of money has changed money to currency and is completely dishonest. The average person in the street when they understand it see it for what it is - theft. It takes an expensive degree to be convinced otherwise.

So here is my list of important things to teach kids about money. How you make this fun is to do it in a historical context starting with the goldsmiths of England. Basically the following points could be covered somehow. How you make it understandable for kids is another point but I guess the class would continue upwards as the kids get older. The basics are simple, but the effects are complicated so I'll leave that for the teachers to suss out.

1. Explain what money is, how it came into existence from the most marketable commodity and how it differs to currency (what we have now).
2. Explain about the purely fiat monetary system we have and how it adversely impact the average person at the expense of a few, by means of fraud, theft and deception. Specifically...
   
   
   
   
4. Paper/Fiat currencies like the Dollar, Pound and Euro aren't money.
5. Private Institutions via central banks and government steal what purchasing power our currency has through inflation.
6. How our dishonest system of fractional reserve banking (FSB) evolved from the early goldsmiths of England issuing more receipts than the gold they had on deposit.
7. How FSB allows banks to lend money that didn't exist and charge interest on nothing.
8. How FSB causes inflation and with debt-money an increased burden of debt to be paid back with interest (also borrowed into existence).
9. How FSB allows banks to crowd out private lending because interest rates are lower than private lenders would lend at.
10. How the FSB system needs ever-increased lending to survive.
11. How FSB is the primary cause of the boom/bust or business cycle.

[*]How putting money in a bank is actually lending to a bank and how deposit insurance, if used, steals purchasing power from every person who isn't getting the insurance payout. Explain the difference between sight and time deposits.
[*]About interest rates and the function they provide.
[*]How the BofE artifically suppresses interest rates...

[*]
[*]encouraging malinvestment and excess lending by showing an unrealistic outlook (F. Hayek's work)
[*]crowding out private capital.
[*]rewarding borrowing and penalising savings, the lifeblood of investment.


[*]About the hidden effects of economics (Bastiat's broken window fallacy and Henry Hazlett's work)
[*]Most of all teach them about how monetary inflation. Specifically...

[*]
[*]How inflation effects the poorest the most, hurting the very people many of the politicians who find the system expedient for deficit spending claim to want to help.
[*]How it dilutes the purchasing power of money earned.
[*]How it's the most insidious form of tax, silent and without representation.
[*]Allows rampant deficit spending.
[*]Transfers wealth upwards from the poor and middle class to the rich.
[*]Harms savers, people on fixed incomes and people with pensions that aren't index-linked.
[*]Allows us to lessen our debt burden dishonestly with our creditors by repaying in pounds that are steadily worse less which is all well and good until our foreign creditors decide enough is enough and then we buy our own debt even more through quantitative easing, creating high to hyper-inflation.




I recently met Andy Burnham MP, because I'm a consitutuent of his and he honestly admitted he didn't have a clue about a lot of this. What chance do we have if our representatives don't understand the banking system? And to be fair, most people don't. That needs to change...

The main financial problem we face as a country as I see it is an enormous credit/currency bubble. There have been 3500 fiat currencies, and they've all failed. The most prosperous times in history were with a money system that was based on honest weights and measures. Our kids get an academic and professional education and zero financial education.

Wanting our kids to learn about money is a great thing but without understanding the system from a macro perspective it won't really help them and us in return very much. And with the enormous strides to take on the Federal Reserve in the US (see HR1207), what a time for us to do the same with the Bank of England.

Anyway, that's my two-penneth or rather two-poundeth. Incidentally, I'd love to hear Martin commenting on or debating these issues.

ABSOLUTELY OUTSTANDING POST.......HOORAY THAT MAN (OR LADY!!)

I agree 100%, instead of teaching out children that this system of fractional reserve banking is the only way forwards, and moreover is actually a good thing, teach them instead about the evils of the current monetary system, which means that money only has value, once it becomes DEBT.

ONCE AGAIN. I APPLAUD THE ORIGINAL POSTER OF THIS MESSAGE, IT IS REFRESHING TO SEE SOMEONE WHO ISN'T INTERESTED IN THE MUNDANE POSSIBILTY OF BYING TWO BANANAS FOR A POUND AND IS ACTUALLY MORE INTERESTED IN THE LARGER PICTURE.:T