Compulsory Consumer Finance Education Discussion

edited 24 November 2009 at 11:14PM in Student Money Saving
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Former_MSE_WendyFormer_MSE_Wendy
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edited 24 November 2009 at 11:14PM in Student Money Saving
I've oft complained 'we're a nation that educates our young into debt when they go to University, but never educates them about debt', yet that's about to change, and it couldn't come too soon as our collective personal borrowing is £1,459,000,000,000.
This month the Gov. announced Personal, Health, Social & Economic (PHSE) education in English primary & secondary schools would be compulsory. While the media focused on sex ed., it also includes personal finance (see MSE News: Compulsory PF education).

What should we teach our kids?
I've been invited to meet Education Minister Ed Balls in January to discuss the changes needed. So I'd love your view on what should be taught. For me it must be more than just how bank accounts work & a look at wide consumer education...
  • Primary. Why not take a 7 year old to a supermarket, and ask "do you know why they put sweeties by the till?" Then explain "it's because a supermarkets job is to make money, so it's trying to remind you to ask Mummy or Daddy to buy sweets so it can make more."
  • Secondary (get free teen cash class guide). Two years ago I spent a day, for TV, in a school teaching twelve 15 year olds. They were fascinated by the malicious genius of credit card minimum repayments, designed to make it look like you pay less, while costing more. After the day they went home and saved their parents £6,000 between them.

    It went so well I turned the lesson plan into the 40 page PDF Free Teen Cash Class that anyone can download to teach their child / class.
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  • Why 50% off at the supermarket means absolutely nothing and why they should only be allowed to claim that if it had been sold at the higher price at that particular store for 28 days beforehand instead of the present crazy rules allowing them to sell the product at the higher price in the John O'Groats store only!
  • pmdukpmduk Forumite
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    When I left school, (almost 35 years ago, eek!) None of us had a clue about tax or national insurance. Some idea of how these systems work would have been very useful.
  • Sweeties are placed at the checkout so that children can pick them up while their parents are waiting to be served. This increases the time and opportunity for children to pester their parents.
  • edited 25 November 2009 at 3:14AM
    dots_thotsdots_thots Forumite
    37 Posts
    edited 25 November 2009 at 3:14AM
    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...

      1. Paper/Fiat currencies like the Dollar, Pound and Euro aren't money.
      2. Private Institutions via central banks and government steal what purchasing power our currency has through inflation.
      3. 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.
      4. How FSB allows banks to lend money that didn't exist and charge interest on nothing.
      5. How FSB causes inflation and with debt-money an increased burden of debt to be paid back with interest (also borrowed into existence).
      6. How FSB allows banks to crowd out private lending because interest rates are lower than private lenders would lend at.
      7. How the FSB system needs ever-increased lending to survive.
      8. How FSB is the primary cause of the boom/bust or business cycle.


    3. 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.

    4. About interest rates and the function they provide.

    5. How the BofE artifically suppresses interest rates...

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


    6. About the hidden effects of economics (Bastiat's broken window fallacy and Henry Hazlett's work)

    7. Most of all teach them about how monetary inflation. Specifically...

      1. 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.
      2. How it dilutes the purchasing power of money earned.
      3. How it's the most insidious form of tax, silent and without representation.
      4. Allows rampant deficit spending.
      5. Transfers wealth upwards from the poor and middle class to the rich.
      6. Harms savers, people on fixed incomes and people with pensions that aren't index-linked.
      7. 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. :D Incidentally, I'd love to hear Martin commenting on or debating these issues.
  • From my own experience at school (many years ago) and that of my children, I believe that all children from the age of 11 years should be told how the income tax (PAYE) and National Insurance systems work. I was fortunate enough to work for a spell in an Income Tax Office and that dispelled any fears that I had from tax and taxation. Like everything else, once you understand what is going on, it's easy.
    Philhen.
  • When you use this man's vouchers he gets richer and you get poorer

    http://www.droug.co.uk/duncan-jennings-econversions.html
  • I think that kids must be taught about saving and they have to learn to spend from their savings rather than from credit. They should also be made aware of the environmental impact of a consumerist economy.
  • edited 25 November 2009 at 7:13AM
    aimee2525aimee2525 Forumite
    5 Posts
    edited 25 November 2009 at 7:13AM
    What dots_thots is saying sounds very interesting but I just felt I had to point out that (as a Secondary Teacher) the content would be far, far above the capabilities of virtually all 15 year olds. It would also be a nigthmare to teach, since the vast majority would not see it as interesting or relevant to them.

    Martin's teen cash class is great, and we have used it before with students, very successfully. I think it is also important to explore students' views of money and debt in order to address the issues and misconceptions they have developed. In the case of our students, many have lack of aspiration and seem to think that benefits or a shop job will be sufficient for them, so something about all the other things adults must pay for (bills, tax etc.) would be useful. At the same time, the students actually have an ingrained view that 'debt is bad' to the point where many think they cannot go to University because of the debt they will accrue. It is vital that debt is covered carefully in order to widen University access to our brightest, but poorest young people.
  • When my son asked for a £60 pair of trainers (& answered my first response that it was a lot of money & I couldn't afford with a 'no, it's not a lot of money, some pairs are over £100!) I tried to explain that money was not limitless this way (as well as testing his mental arithmetic!):
    If an average person brings home £300 (e.g.) a week for 5 days work, how much do they earn a day?
    He said £60. So, that's a whole day's work for one pair of trainers. When you also have to pay for mortgage / rent, bills, food, travel & other essentials, did he still think that £60 was not a lot of money.
    At 9 years old, he got the message.

    Now, we calculate the cost of many things by 'how many hours / days' someone (mum / dad) has to work to pay for it. And he thinks twice.
  • Simple things that maybe get missed with the larger issues.
    That spending using a debit or credit card is like shopping with play money, until you get your bill or go overdrawn-take cash and you are more aware of it and where it has gone.

    Shop around, don't assume your nearest supermarket is the cheapest. A family member is living on her own now at 18 and it is hitting home the hard way that a little time spent looking at prices means a saving on the food bill.

    Write down outgoings and incomings and see if there is money spare and how much to avoid going overdrawn or simply broke until the next EMA or wage comes in.

    I would have loved to be taught this in school instead of some of the less interesting subjects, I was pre computers in schools so this would have been really interesting and could have continued when computers came in with excel and money management packages. Brilliant idea!
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