Compulsory Consumer Finance Education Discussion

Caramshall

Having spent 6 years in awful debt (not thankfully out of it :j), I realise I did not have a CLUE about how to manage my finances, which is something I am very strict about now. I resented the school system for a while for almost making it a taboo subject when it is one of the most important things to learn in life.

I think we need to teach the next generation about simple household budgeting and the rest will fall into place. Ask any secondary school child what they want to do for a living, tell them how much they will expect to earn a year, then show them simply:

- how much the government takes
- how much you will expect to pay in utilities
- how much insurance premiums cost
- how much the rest of the essentials, such as groceries and a car, will take off their budget
- then show them how much is left - split this into four and you have your weekly spend.

Problems could be presented as how to pay for that expensive holiday when you have a small income coming in, then showing how much you would pay for the holiday if you take a credit card out at a nominal percentage rate.

Life skills really, but I wouldn't have got myself into half the mess I did if I'd had known the basics - sad, but true.

shagpuss

At last! Although too late for my teenage boys, I've always felt schools, colleges should teach practical, useful things alongside the basic curriuculum.
Primary school - the "hole in the wall" isn't magic: you have to pay money into the bank to get it out!
Secondary school - how to budget!!! how to compare prices etc for loans, mortgages and goods; how to deal with insurance; that parents' resources are not infinite......(especially when you're at University!); credit cards; how to reconcile a bank statement; how interest is calculated and compounded; how to save; how to subscribe to moneysavingexpert.com!
That's just for starters!

Richarde_2

Some of your friends care about you.

Insurance institutions, mortgage companies, banks, utility companies, shops etc don’t care about you. They simply want your money. They have no moral obligation to help you and no sense of honour. The employees of these organisations won’t be allowed to care about you or keep any promises they make. They may try to appear to be your friend and to be honourable. It will be an act they have been trained for.

The legal system will generally be on the side of business in any dispute – so you will lose (irrespective of the merits of your case).

Government agency employees and MP’s don’t care about you either and primarily want to keep their jobs. They have an obligation to help you as your family pays for them but they don’t see it that way. They see their role as regulating your activities and making sure you behave.

None of these organisations will help you progress so don’t expect them to.

Finally, there are much more important and interesting things in life than money so don’t waste too much time on it.

rikgear

I have to agree with a lot of whats been said, I was always told if you dont earn the money you cant spend it, so requested ways of earning it. My mum would always say its cheap rubbish and wasn't worth the money, but if you really want it, its your money. Then by the time i could buy it then it would cheaper or or i'd have changed my mind anyway. An if i did end up buyin it she'd be right an it'd be broken an in the bin in a few days. This has happened to the point where i'm 30 and been wanting an x-box for 6 months but still not sure i want to spend my hard earned on something i may end up not using.

On another note, people have mentioned about informing children about tax, I think they should also be taught about how tax is divied up for services etc. The reason being, an i'm sure people will agree, we have a bus stop in our village an i'd say the glass has been smashed on average 2-3 times a year for as long as i can remember. Maybe if the kids doing this knew the cost of replacing the glass is comming from thier parents taxes, an in turn them, maybe they would have second thoughts.

The same could be used for litter, instead of the attitude of 'its ok someone comes round to pick the litter up' they might think 'i'll walk the 2 foot to the bin so mum/dad don't have to pay someone to pick the litter up'

mikki-b

AS a mother of a seven year old daughter and as someone who has taught basic maths skills to adults, I think we first need to make sure that kids actually have an understanding of numeracy. If they don't have that, then its difficult to teach them some of the concepts needed.
According the the basic skills agency half the population don't understand percentages, let alone know how to calculate them.
I do try to make sure my daughter understands money, I think its any parents responsibility to, but unfortunately many parents need the lesson themselves first. She wanted a Nintendo DS, so we said she could earn the money to get one by doing chores around the house. We didn't force her to do any, but the more she did the more money she got. We even wrote up a little contract and all signed it. When she got about £80 she wanted to know how much she needed and whether it was enough. I suggested she looked on the internet to see what it cost, so with my help she did, and found that she could now afford it. We make her work out how much money she needs to buy things and how much money she will have left. I have also had discussions with her about why we go to work.

AS for what to teach (maths skills aside).
Budgets.
What people typically get paid, the average wage, the minimum wage etc.
How much tax and NI is. Understanding that gross salary isn't what you get to take home.
The best ways to save.
What things cost. Get the kids to guess how much a basket of shopping costs.
Household bills, how much gas, council tax etc costs, how to work them out.
How to buy/rent a house. Getting a mortgage, other costs to factor in like conveying bills, legal fees.
Costs involved buying and owning a car. Servicing, insurance etc.
How to avoid bad debt, the best ways to borrow money when you need to. Credit ratings and the impact on them if you miss payments.
For those going onto higher education, student loans, tution fees etc.
The benefits system and how much money you would be expected to live on, should you be in that position.
How to write cheques, open bank accounts, the different sorts of accounts, what credit cards, debit cards and store cards are and the pros and cons of each. The costs of overdrafts etc.
Pensions, what they are and how to make sure you have enough to live on when you are old and grey, the impact of leaving it later to start. ( I remember an pensions advisor amde reference to the difference between an old man and an elderly gentleman, 15% of your salary now)
The consequences of bad debt, going bankrupt, what happens and the long term effects. (My brother works for the insolvency dept).
This does sound like an awful lot, and knowing several teachers I can understand the concerns of how to fit this in an already straining workload for both teachers and kids. Some of this could be incorporated into maths lessons as a more interesting way to teach other concepts, and it would be spread over several years. Of course in an ideal world, ALL parents would accept the fact that being a parent means you have the responsibilty to teach your kids all sorts of stuff, not leave it to schools (but thats a different story and I won't get on my soapbox).

chantel17

I think children should be taught in primary schools about household budgets and expenses, morgages/rent, bills, heating, food etc so they understand how parent's money had to be distributed and is not just available for "wants".
I also like how Martin urges people to buy what they can afford, eg. for Christmas presents, to draw the line and go for a low-key Christmas if that is all you can afford, not spend the rest of next year paying for last Christmas. I think children would learn to appreciate it alot more if they got one or 2 key items rather than lots and lots of stuff they will never look after or appreciate. My husband used to work in a secondary school and I was shocked by the amount of stuff the children received. There is alot of pressure now on parents and children to have everything you want but children (and their parents) need to learn this is not always affordable and you'll never be satisfied, always wanting more. What about spending time with each other as a family, doing things with and for one another, having fun not just buying lots of presents which can often divide families anyway as everyone is off doing their own thing on DS, computer, TV, iphone etc. Have these things in moderation but remember somethings are more important than possessions. Teach children that living within your means is achieveable and desirable, being in debt is stressful.:T

Spencerx

Just a thought.......Because I deal with all the money matters in my family, the children only ever see me buying things and paying the bills ,they have assumed that it is all my money. I had to explain that their father earns the bulk of the money (I work part time), it goes in the bank and merely administer it. They must have thought their father was sitting on a gold mine and was very mean!!!

DG1947

Can I suggest that the education is taken one step further back and young people taught all about sales psychology-the creation of a perceived "need" for something by advertisers in a consumer, the creation of fashion and how people are made to feel somehow less if they do not literally buy in to the present trend in clothes shoes etc. Once one is aware of and understands all the tricks & dodges, it becomes a lot easier to resist.

zebedy

I think you have to start with the real fundamental, that at some point your debts will catch up with you.
A lot of folks these days seem to think "I need the latest gadget" which is very different to "I want the latest gadget and can afford it".
It's too easy to get credit and go mad but eventually you have to pay it back - this would be a good lesson for teenagers

Little_Miss_Penny_Less

Well, I'm not a parent quite yet but I'll add in my thoughts anyway.

When I started using this site I was frankly amazed by all the things about money and finance that I just didn't have a clue about. I like to think I'm a bright and well educated young(ish) person of 29, but it really was astounding how little I knew about something as fundamental as money.

Lessons on the basics would have been a great help, perhaps not all the way through school - as someone said earlier the fundamentals of Maths, English and Science should give you a grounding in these skills (and other subjects have money aspects in them as well: Thinking back, one of the things I was taught at school that always stuck with me and it wasn't directly to do with money, but part of a history lesson, was about how Germany went into a deep recession between the first and second world wars and they kept printing money until it was practically worthless and people were taking a wheelbarrow full of banknotes to the shop to buy a loaf of bread).

But once you get to an age where you could be employed, or may be thinking about leaving home or education - perhaps from about age 14, there should be more specific skills taught. Things like:

Budgeting - not just forward planning but monitoring your incomings and outgoings, understanding a bank statement or a balance sheet.
How much bills cost (rent/mortgage, utilities, food, etc) when you don't have your parents to rely on. Along with basic housekeeping such as meal planning, basic cooking skills, etc
What interest rates and inflation means - on both debt and savings
An explanation of tax, national insurance, etc, not just tax on earnings but tax on other things as well. An overview of pensions and what you'll get off the state if you don't prepare for your own retirement.
That a bank is not a benevolent institution who volunteer to look after your wages until you feel like spending them: how they make their money, what bank charges are, how to choose which bank you want to use, etc
Minimum repayments vs overpayments
The debt spiral - one thing leads to another

There must be some more exciting and practical ways to teach this to children and teenagers than just lecturing them. The Young Enterprise example mentioned above is a good example, but rather than aimed at making money perhaps it could be a year long challenge whereby students are set up with a virtual bank account or similar where they make decisions that lead to how much virtual money goes in and out of the accounts so that they can see how their decisions affect the balance (i.e. spending on certain things, choosing to work or not, etc). It might be a terrible thing to say but a lot of people on this site will know that we're only knowledgable now because we got into difficulties - we learned the hard way so to speak - unfortunately this may well be the case for future generations too but at least by equipping them with the basic knowledge and forewarning them we might be able to stop them repeating our mistakes.

Could we incorporate more recent financial history into history lessons - what a recession is, when did the last few happen and what happened to real people during them. How did people cope with mass redunancies and high levels of unemployment. What did people do to tighten their belts. We learn all about how people coped during the war, but what about more recent examples? My parents did an awfully good job of hiding the effects of the last recession on the family finances, which meant we had a lovely childhood not worrying about money (we knew we didn't have a lot but we had each other!) but meant I was quite unprepared and ill-equipped for the last couple of years. Perhaps if more young people had known the details of the last recession there would have been less people buying houses on 125% mortgages at the peak of the price boom this time round?

To those of you who say that this should be taught by parents not schools, while I agree on principle that education should begin at home, there is a whole generation of young people about to become parents who have been raised on a buy now pay later economy, in a very materialistic age, and most without a decent understanding of finance or money themselves. Many current and future parents would be ill-equipped to teach these things to their children having barely scraped by themselves even if they wanted to teach their children at home. Or perhaps we can take these education classes one step further and teach adults a course of basic finance across the whole country - I bet the exam results of that one would be an eye-opener!