Financial Education in Schools

Debate between Jerome Mayhew and Gregory Campbell

Wednesday 6th September 2023 Westminster Hall

[Jerome Mayhew (Broadland) (Con)]

I beg to move,

That this House has considered financial education in schools.

It is a great pleasure to serve under your chairship, Dame Angela. Tip O’Neill was famously linked to the phrase “all politics is local”, but I can go one step further and say that this politics is personal, because I grew up with no financial education at all. I was given no education or instruction on how savings work or about interest rates. I was given no education about investment or what an individual savings account was—I had no idea. I did not know what pensions were; I had heard of them, obviously, but I had never been instructed on how they work, how to apply for one, what the options are, whether I should have a workplace pension, what a final salary pension is, what a defined-contribution pension is or what the differences between them might be—I had no idea.

I had no idea what mortgages were. I had heard of them, obviously, and I knew that people had them, but I did not know how to apply for them, the differences between an interest-only mortgage and a repayment mortgage, or what an endowment mortgage was—I had no idea. I had no idea about debt and debt management; I knew that I spent my money too quickly, but I did not know anything about debt management. If I got to a stage where I was in financial stress, as many people do during their lives, I had no training at all on how to manage that effectively.

I have children now—a 20-year-old who is just going off to university, a 17-year-old, and a 14-year-old. During the recess, I asked them whether they had received any financial education or training. Getting on for 40 years since my defective education, they have not received any education about financial matters at all, yet we know that that is a crucial part of our lives. A huge amount of research has been done by academics and the financial sector on how important financial training is for people’s ability to lead normal, high-quality, independent lives. I will go through a little of that research to give Members a flavour of it.

Cambridge University and the Money Advice Service did some work in 2013 in which they established that most money habits are embedded by the age of seven. They found that it was difficult to reverse those early-learned approaches later in life. If somebody does not have them by the age of seven, when they are at primary school, they are already on the back foot.

This year, Santander surveyed a large sample of adults in the UK, and 70% reported that better financial education would have improved their ability to manage their finances during the cost of living crisis. This is a real and present issue. Some 68% of adults think that financial education should be part of the primary school curriculum, so it has broad support from the general population. This is a real problem. I am not alone and I was not unique. I am the general public; I have not received financial education. That has a huge effect on people’s lives right now.

Back in 2021, GoHenry, Censuswide and Development Economics demonstrated at the very least a correlation between the financial education someone receives as a child and their later earning capability. Some 46% of those earning less than £15,000 had received financial education; among those earning between £55,000 and £65,000 a year, 77% had received financial education. It has also been demonstrated that if somebody receives financial education as a child, they save more into their pension pot. On average, people who receive financial education as a child save 44% more each month into their pension than those who did not. That is a startling statistic, and it is not just pensions, but savings more generally: of those who received financial education, more than 50% had saved more than £5,000 for a rainy day; of those with no financial education, only a third had saved that much.

I am sure Members are asking themselves whether that is correlation or causation. If it is causation the debate should finish now because the case has been made overwhelmingly for effective financial education in the school curriculum, but let us consider whether it is correlation. What we are really saying is that there is a middle-class secret to financial education and that those who receive such education at home get a huge leg-up throughout the rest of their lives. Even if it is correlation, it is the job of state education, universally applied, to overcome the deficit and level up so that we can close the middle-class leg-up and bring everyone up to the same standard.

I accept that the formal education system is not about proselytising—it is perhaps not appropriate for a teacher to say, “You must have a pension”—but it is about providing knowledge and information so that students can go on to make good decisions themselves. It is not the role of a teacher to say, “You have to do it.” I accept that. But where the outcome of a good decision is so profound both for the individual and for society it begs the question: how much of that knowledge should the education system focus on providing? A good decision in this area has a huge impact on society.

Let us look at the economy. In 2022, the pension wealth of this country was £5.4 trillion—in private pensions, not state pensions. Some 42% of all household wealth is contained in the pension system, 69% of which is invested in UK assets. If we made a small change in the amount of money going through the pension system, that would have an enormous impact on the level of productive investment in the United Kingdom economy.

Then we have the impact on mental health. We know that 11.5 million Britons have less than £100 in savings and that financial stress has a huge impact on mental health. I have had periods when I have been very worried about money. The worry is so profound that you cannot think of anything else. It dominates your life. We know that treatment for an individual mental health episode costs the state between £600 and £800.

[Mr Gregory Campbell (East Londonderry) (DUP)]

I congratulate the hon. Gentleman on what would at any time in our recent history have been a timely debate. On the point about those 11.5 million people, most of them in the lower socioeconomic groups, does he agree that it is all the more important that teachers and those involved at the outset of people’s careers try to inculcate in younger people the need for and benefit of saving even small amounts initially, which build up to a long-term benefit in later years?

[Jerome Mayhew]

You are absolutely right. I will come on to the benefits of compound interest, which is part of the answer.