Debt message to politicians

MSE_Martin

Judith that is very interesting - have you looked over the new 'life skills' section of personal finance - i would love to read your take on that as a maths teacher.

Martin

Big_O

I don't know that they were on the sylabus but our maths GCSE teacher DID teach us how to work out income tax and compound interest. We also covered misleading graphs, partly using text books and partly newspaper articles - we were examined on those. This was back in '98. I don't know what it's like now, but it's well worth teaching all the things that Judith mentions. It might even kindle some interest in maths at school; one of the most common statements by students of what they were studying was, "When are we ever going to need to know this in the real world?"

ReportInvestor

Hi Judith,

I'd leave out discussion of misleading ads - e.g. for critical thinking.

But why, oh why, have generations of numbskull Maths teachers neglected the opportunity to make their subject more meaningful ? Are they just robots who march to the drumbeat of the National Curriculum?

Or have they been sneakily teaching probablity via poker instead .

ericthelobster

Trouble is we live in a culture where debt is increasingly accepted as the norm, and it's not just the fault of eager money lenders. Here's an example...

I rent a house to someone, who unfortunately has lost her job, and sadly there seems little likelihood of her finding another one and she has stopped paying me rent - hardly surprising as her total income now, on benefits, wouldn't even cover the rent, let alone any living expenses too. Being under 25, she qualifies for only around £35 per week housing allowance, where her weekly rent was about £100. I am left with little option but to seek possession of my house so I can let it to someone else.

Now - as is 100% standard in these cases, the local council have told her to stay put and wait until she is formally evicted by a bailiff, and the whole process is likely to take several months, obviously. At that point, the council have a legal obligation to rehouse her, and they will - however by that point the rent arrears will have built up to several thousand pounds, and if I pursue it, the tenant will end up with a CCJ against her, ie a substantial debt hanging over her for most of her twenties.

As an alternative, I have offered to write off the rent arrears to date and even to give her a cash incentive to leave now, with no strings, but much as she wants to take me up on this, she won't/can't due to the instructions being given to her by the local authority.

This is clearly a scenario which is repeated daily all over the country just because of the 'system'. Madness or what?

Marigold123

Good article, Martin, it says exactly what it should say. Do I think anyone in Government gives a sh*t? No, sorry, I don't.

It's pretty much the same thing I was saying to my own careers teacher 26 years ago, except then it was about kids being taught how to survive if they didn't couldn't get jobs, how to apply for benefits properly, save money and make sure they got everything they were entitled to. Basically to teach kids how to survive financially, navigate red tape and be financially savvy.

Did anyone even listen? Of course they didn't. It didn't fit with their priorities, any more than it will fit with Government or schools' priorities now.

It's sites like this and programmes on the dear old, much-maligned telly, that get the message out there, right into people's homes.

Keep spreading the word!

Marigold

drsims

Excellent article, Martin. Agree wholeheartedly that we need to teach kids/students the art of money management. Personally, it has taken me until now at the age of 40 to truly understand this art - I so wish I had had this knowledge 20-25 years ago. Maybe you should write a book aimed at students - they could have a copy in their college freshers' packs.

blackdoor

I read this an it sounded like me! First a student borrowing, then onto an overdraft, then onto a student credit card, then onto consolidating into a massive loan....biggest regret in life.

I absolutley agree that borrowing should be an education and advised on how to consider your options. Yes students have no choice to borrow but we have a choice to carry on borrowing from any other means. I thinks banks could go under if we got this education, because the reality is we'd be scared off if we actually looked at how much we actually all get charged in the end.

bunking_off

I think what I find most frightening is the lack of basic knowledge in supposedly the most educated people this country has.

A few years ago I did an MBA through the Open University, and did the finance option...to be honest coming from an engineering background I found it reasonably simple.

What I did notice is that a high proportion of my fellow students struggled, largely because they couldn't grasp how compounding of interest worked (the course went onto many far more complex stuff around corporate finance, project appraisal, option theory etc etc, but the concept of compounding fundamentally under-pins that).

Now, look at real life. Everyone's future income depends upon returns compounding in our pensions. Everyone's future outgoings depends on the nature of interest compounding in loans/mortgages meaning one pays back far, far more than is originally borrowed. Yet we seemingly don't teach our kids what the implications of all this is, and what an APR is even in the most basic terms. Wrong, wrong, wrong.

Incidentally, it's the compounding issue which for me is the real ticking time bomb on student loans. It isn't that our young people have to repay their debt per se...it's the fact that repaying that delays them spending the money for other purposes. That's a drag on the economy as a whole (especially if you think approx 50% of 20-30 yrs olds will be caught in the net), but more importantly it will probably delay when graduates start contributing into a pension scheme. The principle of compounding means £1 paid into a pension scheme when you're 20-odd will return far, far more than £1 paid in later (at a randomly chosen return of 6%/yr, it'll yield double £1 paid in your mid-30s, treble £1 paid in your 40s, five-six times £1 paid in your fifties). I can't help but feel we're storing up an accident for future generations.

GM1966

Yes, you say all the right things Martin, but some people just don't listen to you. I tell my friends similar things, but they're not interested and have the "can't be bothered" attitude.

Why is it that some people won't spend a couple of hours up front getting themselves a cheap loan (or anything for that matter) when they're going to have to work much harder for years to come paying it off?

Unfortunately people are stupid, there's a lot of it about and you can't preach to stupid people because by definition they're too stupid to listen to you.

So, for all us intelligent ones, thanks for such a great article. Will anyone listen to you? Well Martin, if you're trying to get MPs to change anything that doesn't directly influence them then I suspect that they won't be interested and will accuse you of "going off on one". Well, I for one don't subscribe to that idea, but I suspect that these aforementioned people will.

Regards,

Gary

SHIPHAM

Dont know what the average debt of the Australian public is but the government websites listed by Aus traveller seem to offer help and advice to those people that are in debt and those that are debt-free and society as a whole. Whether or not Australian people that exist below the poverty line have access to computers/websites is another matter; hopefully the Aus goverment provide the information in the multitude of media outlets.

However, whether or not this kind of information would be used by those contemplating taking on credit or debt in the UK, and have access to the information in a timely way is something else; of course if the UK government did generate such websites the accusation of the nanny state interfering yet again would be heard loud and clear from all quarters of society.

Notwithstanding, the article by Martin is first class and the comments that I have read thus far, thought provoking.

k_sta wrote:

Hi All,

I am an aussie traveller who has just returned to oz after many years in the UK using sites like this.

One thing I have noticed here about this issue is when I got back the government is running a public campaign about understanding finance.

See
https://www.understandingmoney.gov.au

I like this one addressing events in life and how they effect finances:
http://www.understandingmoney.gov.au/content/consumer/events/

and a government run loan calculator:
http://www.understandingmoney.gov.au/content/consumer/tools/

I have yet to compare it to a bank calculator.

Is this the sort of thing you are talking about for government to do Martin??

K