How much should education prepare people for personal finance in adult life?

dirty_magic

I really think schools should teach more about finances, especially how their taxes are calculated. It's bad that there are so many people that don't have a clue and end up on the wrong tax codes. This is especially true of students or apprentices who sometimes have more than one job to get by. You can't really blame it on the parents; half of the time the parents don't understand either.

It could be incorporated into both maths and PHSE. The problem is a lot of kids won't be interested because they'll see it as a future problem. I think college students would take more of an interest because they're closer to the world of work, but then it excludes people that don't go to college.

lush_walrus

tomtontom wrote: »

If a parent is incapable of teaching their child such basics then what else is the child missing out on?

Sad times.

Exactly, I agree with you. So much is expected of schools now and so little expected of parents.

lush_walrus

zagfles wrote: »

Yes. They don't know how to work out their tax credits, they don't know how to work out their taxes, so can't tell if something is wrong. They don't know how to work out the best deal for holiday cash, they don't know how to work out whether a loan is affordable, they don't know when and when not to borrow. There's a bit more to loans than just understanding they need to be repaid:rotfl:

Some loans are almost unavoidable, eg student loans, mortgages. Unless they want to spend their lives in a low paid job in rented accomodation. Some loans can be financially beneficial even if credit isn't needed, for instance using credit cards and paying them off every month, and getting cashback. People need to understand how these work, how an interest change would affect them, when is the best time to pay them off, how APRs are worked out etc. Why not? It's applied maths. How compound interest works, how geometric/arithmetic progressions can be used to work out how much they need to invest in a pension, for instanceThat's probably because they don't understand the use of stuff like algebra, for instance. This could easily be taught in school as part of maths.

I think we will have to agree to disagree. Applied maths is fine and is in my experience taught in school. My children for example have had homework on compound interest. This is not my understanding of what is being proposed. The proposals are for stand alone lessons on money management, far more basic than maths.

Cash-Cows

It could replace religious education.

zagfles

lush_walrus wrote: »

I think we will have to agree to disagree. Applied maths is fine and is in my experience taught in school. My children for example have had homework on compound interest. This is not my understanding of what is being proposed. The proposals are for stand alone lessons on money management, far more basic than maths.

Yes, agreed, my point was that so called "financial education" could be incorporated into maths fairly easily, virtually all financial eduction will have an element of maths to it. I know schools do it to some extent, but they could do it to a far greater extent.

How many grown adults can work out how much they need to contribute to a pension assuming a particular return, inflation and annuity rate? How many know how their tax and NI are worked out? How many know the formula for mortgage repayments and how to use it? How many could work out whether their income is low enough for tax credits? How many can work out the best way of spending abroad?

You only have to read the taxes board, the pensions board, the credit cards board, the benefits board and others to see people are struggling with basic finance because they don't understand the maths behind it. Or haven't been taught how to apply the maths they learnt at school.

enthusiasticsaver

I am not sure that school is the best place for children to learn financial education. We taught our two daughters ourselves how to budget which I think is the best skill any young adult can learn in terms of finances. We opened up basic accounts for them and taught them the importance of saving and gave them monthly allowances to teach them to budget for clothes, entertainment, etc etc.


I am not sure that teaching them compound interest or complicated formulas on how much a mortgage will cost them will have much impact on a 12 year old. The best lessons learned are through experience.


Both my daughters appreciated the discipline of going down to the bank every week with a proportion of their pocket money and seeing it grow until it was large enough for them to buy something they really wanted. My younger daughter however never wanted to spend hers - even now although she is married with a baby she still likes the security of having savings.

POPPYOSCAR

Yes it should be taught in school.


It is an essential part of life.


Our daughter has just started work and we have been explaining all about tax, nat.ins. bank accounts mortgages etc.


Why did they not teach us all this in school? was her response.

Person_one

lush_walrus wrote: »

Exactly, I agree with you. So much is expected of schools now and so little expected of parents.

I think its more an acceptance that there are parents who can't/won't teach this stuff for a variety of reasons and that their children don't deserve to be disadvantaged because of that.

My parents were always open about the family finances so I've been able to manage ok as an adult despite periods of very low earning, but I have friends who were kept in the dark and had to figure it all out for themselves at 18 and got into real trouble because they fell for advertising.

onlyroz

zagfles wrote: »

Financial education could be incorporated into the maths syllabus easily enough - that would solve two problems, as well as the financial education, kids would get to understand the point of things like percentages, algebra etc.

Instead of meaningless equations to solve, give them real world scenarios where they can apply the algebra they've learnt. Such as working out what gross earnings someone would need to get take home pay of a certain amount, or working out the threshold for tax credits eligibility, or working out what the best way to get foreign currency is, or working out which loan to pay off first.

These are all applications of maths which I've used to answer questions on MSE from grown adults who clearly haven't got a clue how to use basic maths to answer the questions themselves.

I'm not disagreeing with you, but I can just imagine the Daily Mail take on the concept of teaching tax-credit eligibility criteria to 15-year-olds

McKneff

It amazes me how many people who have been working for years and are quite happy to let the tax man take a major portion of their salary and not know how/why/ etc.


Even 50 year olds come on and say 'I understand that I can earn 10,600 before I start paying income tax.


They have no idea how the basic tax system works.....