MSE News: Saving money can be child's play

ernie_3

ragz wrote: »

Which leads to the point I was about to make. Isn't it our job as parents to educate our own children about money? Mine are 2, 3 and a month old. The older two have money boxes that I give them money for, they save up and when we have enough in there we take it to the bank and change it then go and buy them a toy... teaching them about numbers as well as saving money - and they aren't even at school yet.
The schools have enough to do, I think parents should take some responsibility.

(Though conversely, I am having to help my parents and inlaws with credit cards etc and budgeting, so I'm not sure where I got my money sense from... wait, yes I am, this site lol)

you are right..we always seem to want to blame albeit partially and or a third party. Like everything it takes two to work alongside each other and work as a team.The current climate financially this is a good time to educate everybody not just our children,luckily we have got this site. So to all members/readers please keep up the good work:T

Sgt_Oddball

I think this is an excellent idea and a long time overdue. With hindsight it really has been a major flaw in our education system. The sad fact is that many people in their 20's and 30's are now learning hard lessons that, with a little input earlier on, could have been avoided.

However, I think it also has to be taught in the most correct way. I don't think a 2 week intensive course after GCSE's would be the best way (although probably better than nothing). As some posters have suggested, a better way would be to immerse financial education into other lessons, especially Maths, over a longer period of time (e.g. from 13 onwards). In fact, I am sure most students would be more interested, and consequently learn more readily, if examples from real life were used. One example would mobile phone contracts (this would encompass many money lessons in itself).

Lets hope the government give this some serious support rather than lip service!

psdie

IME, most people seem clueless about finances until they hit their mid 20s-30s, whereupon they are forced to learn the realities by the need to save deposit for a mortgage. And as others have observed, some still haven't learnt well into their 40s-50s .. e.g., my own parents, who could have saved literally ~£10k+ over the past decade or so by reviewing their household suppliers.

A common 'err' I've seen is keeping savings (as in £10k+!) in a current account (GAH!) instead of an ISA (or at least savings account). The most common excuse being that ISAs are "complicated" (possibly due to the perception that they are associated with stock and share options) and that their money is easier to get to if held in a current AC (which, of course, is just another part of the problem!).

I unfortunately include with this most members of my own family and close friends, so I'm not being snobbish of the unwashed! It's just a fact that most people see the money they earn as their spending money for the month (possibly +borrowings!), rather than realising the magic of savings/compound interest and sensible investment (e.g., property with potential).

A budgeting tool in something like MS Money (sadly now abandoned, so am looking for an alternative) can be fantastic for planning cashflow - put in your monthly income and monthly/annual outgoings, and it will show you a continuously updated graph of your forecasted account balance over the next 90 days, so you can plan what you can afford to save, whether there are cashflow problems ahead, etc.

It also included the bit that always inspired me to save: a graph of my forecasted savings balance. Thanks to the magic of compound interest (assuming fixed rates), so long as you save the same amount each month and leave it untouched, your savings balance will increase EXPONENTIALLY, no matter how much you chose to save each month! *THAT* is the secret to how the wealthy get wealthier (along with shrewd investments with those funds).

Get kids hooked on saving, and the rest follows. Save money on your monthly phone bill = more money in savings = cash to buy something big at end of the year. Continue with that mentality through life and you'll do well

scottishblondie

I was never taught anything about finances in school, but my Mum educated me on the value of money early on in life. I am now, and have always been, very careful with my money and I always save for the things I want. I sometimes even feel a little guilty about spending large amounts, but I think that's kind of good in a way

When I realised how bad some of my friends are with money I was absolutely horrified! I get asked for financial advice by many of them, a recent example being a couple I know that want to buy a flat.

The BF graduated at the same time as me in the same area and has a decent job, the GF is a eternal student now working in a call center, but returning to uni in September. They live (just) inside their means but have virtually no savings due to takeaways, buying dvds and games and going on a cruise in Florida every year. (It's only a £1000 a week each (!!)).

They also need approx £4000 for GF's uni fees come September. Anyways, they come to me and say "we want to buy a flat in "x" area in 12 months, what should we do?" When I went through their situation I was brutally honest and they took it quite well, even when I said there was no way they would have the money in 12 months. I covered their saving options and gave my opinions, and worked out they could save up a deposit in 2 years, provided they cut various luxuries back, including the yearly cruise. I did almost fall off my chair when they didn't know what an ISA was though!!

At the time they agreed with everything I said, but it turns out the lure of sunshine and cocktails was too strong as they are going away for 2 weeks this summer at a cost of 4k. I know that they don't have the money to cover this cost as well as the ~4k for GF's uni fees (she isn't eligible for any more support) and I simply can't understand the mentality of spending money on luxuries when you don't have it! I'm pretty sure it all stems from a total lack of education about money when they were younger - I'm not overly familiar with BF's family but I know that GF's family shares a similar lack of monetary responsibility. They just spend what they want when they want, and never seriously think of the long term.

Sorry for the rant there, it just gets me going a bit that my friends seem to be intent on pushing themselves into financial difficulty. So my opinion is that financial education in schools is very important for children these days, as a lot of kids don't seem to be getting it from their parents. It shouldn't be necessary for people to learn the hard way that spending money without regard for the future is a bad idea, and I think that a proper education could really help - as long as the government really follows through!

LMac

Im afraid that Im another one who thinks education about money should be mainly at home, however, as discovered with Martins Teen experiment, not enough parents are either a) money savvy enough to teach their kids or b) think that its necessary to teach them.

I cant remember very much education on money handling when I was in school (I left high school in 2000), except a pie chart showing percentages of income that should be designated for things like housing, food etc.

However, I also dont remember ever talking to my parents about money, rather I learnt by example - saving for the things I wanted. They cant teach that in schools!

If they are to teach it in school, I think it should be taught alongside cooking cheap but nutritious meals, how to save energy, and updating items, such as clothing to get the best value possible.

farso

I would personally not argue that debt is bad for the economy, but rather bad for the individuals in debt alone.

Someone in debt will be forced to work for a longer amount of time, hence contributing more tax to the government and more money going to the banks, including the bank of England. Also, while someone is working, they are not drawing any pension, using fuel to get to work and potentially reducing their life expectancy (depending on type of work). All of these factors reduce the amount of money that the will have to pay out to the elderly.

Looking at the situation from this angle, it is easy to see why the government does not want people to be educated on debt and how to be able to manage their own money. Of course they want to be seen to be making an effort, but it is obviously not working, so perhaps they are not wanting to succeed?

Jeff77

That is so true. Not many people know about it for sure though I don't really believe that the government does not want other people to know about it as well. It would really be interesting if you imagine a whole country where no one has debt. I bet lots of companies would go bankrupt because of it.

PlasticMan_2

I am SO GLAD this is being pushed.
My parents never taught me about credit card debts and refinancing loans. Why would they - that stuff didn't exist for them?

I left Uni with a huge overdraft, and Lloyds told me to pay it off with a loan - at 14%. They're a mainstream bank and I had always banked with them, so I trusted them. With large loan payments and a low income I got back into another overdraft. Lloyds added it into the loan for me. None of this taught me to be frugal...

Only stuff like MSE has made me think about interest rates and why banks operate the way they do.

Our kids will have things we don't to contend with, so they need to be taught not just about the current financial issues, but to take an interest in and a responsibility for personal finance. They need to be taught not just the facts, but how to keep learning as things change.

huntedhippo

I'm currently a maths teacher in training and will comment on the knowledge and attitude of teachers as I see it.

PSHE lessons consist of 25 minute periods combined with registration in which the children role play certain situations and are asked to think about the 'right' choices. Healthy eating is largely about cutting fat and salt out of the diet developing misconceptions that anything with fat is unhealthy and anything without is healthy. Non-smoking lobbies also have their place. Finance education is limited to opening bank accounts and other administrative tasks which are considered boring by teachers and so skipped over in much less time than is scheduled.

Teachers simply do not know about financial issues themselves. As Martin mentioned in his post, the headmaster's son saved the second largest amount of money. If teachers are to teach this subject then they need to be educated first. Of course, teachers specialise in subjects and so they will be resistant to any suggestions that they should learn about other areas.

Putting Financial Education on the Curriculum is a good step but one of many more that need to be taken to make this plan successful.

bungeejump

It's nice to think that tomorrows children will be taught what debt is but in reality they won't. They will be taught how to use debt to become better consumers and debt slaves.

True 'debt' is how our money is created - out of thin air - literally. Unfortunately only the principal is created never the interest due.
In order for you to pay back the interest on a loan someone else must first borrow the interest money and if you use it to pay the interest on your loan what are they going to use to even pay the principal on their loan? never mind their interest which was also never created. This goes on ad infinitum. Someone, and increasingly everyone, must always be in debt.

The only way the current banking system works is for more and more people to borrow more and more money in an exponential fashion to cover the interest that was never created. That is why until people understand how (central) banks are taking everyone for a ride, loans and debts must and will become ever larger and more reckless. If they do not the financial system will implode.

Through the miracle of fractional reserve banking, banks take your £100 deposit and lend it out to 10 other people simultaneously each at 5-20+% interest (note. £900 created [10x£100 - initial £100] but no interest created). That's a total interest rate of 50-200+% going to the banks while if you are really lucky they will give you 3-5% on the same £100. As a result banks cream money off everyone else but provide no useful production or contribution to society.

Take the time to educate yourself as this is something that will never be taught in schools. There is a excellent introductory video called "Money as Debt" by Paul Grignon.

see http:// video.google.com/videoplay?docid=6182802717158469419&ei=23rgSZiJMM2Q-AbrxeHfBg#