Financial Education in Schools

Miriam Cates Excerpts

Wednesday 6th September 2023 Westminster Hall

[Miriam Cates (Penistone and Stocksbridge) (Con)]

I congratulate my hon. Friend the Member for Broadland (Jerome Mayhew) securing a very important debate and on his compelling speech; he has made some brilliant arguments, which I will try not to repeat too often.

I used to be a secondary school science teacher, and I distinctly remember that one summer, when I had bottom-set year 10 for biology, only half the pupils turned up to the lesson. I remember saying to those who had arrived, “Where’s everybody else? We’ve got an important lesson on photosynthesis today,” and they said something like, “Oh Miss, FIFA 2010 came out last night. They’ve been up all night playing it, so they’re not coming into school today.” So I said, “But this lesson is really important. You’re not going to pass your GCSE. It’s too complex to repeat it or to catch up at another time, so we’ll do something else.” Then one of them said, “But Miss, we don’t need GCSEs. I’m just going to work in McDonald’s.”

So I thought, what a great opportunity to prove that even if someone does work in McDonald’s full time, they are probably not going to be able to achieve the standard of living they want. So instead of learning about photosynthesis, we spent the lesson creating a spreadsheet on how much someone might earn if they worked at McDonald’s for 48 hours a week. We looked at what their rent costs might be, what their energy bill might be, how much they might spend on food, and how much it would cost for them to have the lifestyle they wanted—to be able to buy the computer games they wanted, and clothes to go out in. By the end of the lesson, they had realised that a job at McDonald’s would not fund the lifestyle they wanted.

Now, there is nothing wrong with a job at McDonald’s, but it is really important for young people to understand the link between working hard at school, getting qualifications and leading the lifestyle they want to lead. I will never forget that they were far more engaged in that lesson than in any other lesson I taught them—probably because they were not learning about photo- synthesis, but also because the subject had such a practical impact on their lives and enabled them to see how the world works. I am convinced that financial education at school is important for children, and particularly for those who do not feel that the big careers, opportunities and qualifications are for them.

As my hon. Friend put it so eloquently, money management is such an important life skill, and there is a clear link between ending up in financial difficulty and not having good money management skills. The Centre for Social Justice, which has done some excellent work on the issue, found that 14 million people who experience financial difficulty said that that was partly because of poor money management, and young people are very much over-represented in that group.

In many ways, it is not surprising that young people lack confidence, knowledge and experience in managing money. A lot has changed over recent generations that perhaps makes young people today less confident than previous generations. First, we live in a cashless world. In previous generations, children could literally watch the money coming in and out of the home. They would have seen cash in a tin on the table or in their mum’s purse. They could touch and feel their parent’s wages as they brought them home from work. They would physically see the money supply depleting during the course of the week, and watch their parents pay the rent, pay the gas meter and put actual coins in a saving pot.

As my hon. Friend told colleagues, the Money and Pensions Service found that money habits and behaviours are generally formed in children by the age of seven and stay with them for life, but many seven-year-olds today have no understanding of where money comes from or how parents make decisions about what is spent, because that is all done virtually. There are massive advantages to that, of course. There are some brilliant money apps that help people to save and plan, and there are some great ones for children too; we use nimbl in my house, and as long as I remember to top it up before pocket money day, everybody is happy. The point is that young children do not see the money, so they are not involved in budgeting unless we explicitly include them in money handling. Otherwise, they miss an early opportunity to see how money works.

The second reason why young people lack confidence is that they enter the labour market so much later than children in previous generations. Many people my grandparents’ age started work at 15. They went out, learned a trade and brought in a wage. They had no choice but to learn how to use their wage wisely, so they had early experience of the importance of careful money management, while still having the back-up of parents. Now, with compulsory full-time education until 18 and half of young people then going into full-time higher education, today’s young people just do not have the opportunity to earn a wage and learn financial responsibility until five or sometimes even 10 years later than children in former generations. Some young people go through their entire adolescence, and into adulthood, with very little practical opportunity to learn. Again, of course, there are significant advantages to more time in formal education, but we need to be honest about the disadvantages too: the lack of real-world experience and responsibility and the lack of confidence, and the fact that those can lead to poor decision making later in life if they are not rectified.

The third reason for children and young people having lower confidence than children in previous generations, which is linked to being dependent on parents much longer, is that parenting has changed. Parents find it much harder to say no to children than in previous generations; that is just a culture change that has developed. We bail out our children far more and are reluctant to let them fail, so they miss out on the opportunity to learn important life lessons about taking responsibility and consequences earlier on in their lives. Research by the American psychologist Jonathan Haidt reveals that, in western culture, today’s 18-year-olds have the life experience of the 15-year-olds of generations ago, largely because of the way that society and parents over-protect them, including financially. As parents, we have to ask ourselves: what is the exit plan? We cannot expect children to go from handouts to careful money management and understanding pensions and interest rates on the day they leave school or university; there needs to be a gradual and deliberate passing over of risk and responsibility.

The final reason for poor money management skills in the younger generation is debt. Debt and credit have become an accepted part of household finances in a way that they were not before. In the 1980s, household debt accounted for about 30% of GDP; now it is well over 80%. Of course, the boom in property prices has added significant debt to household budgets, but with the availability of credit cards and the lack of stigma about debt, it is hard for children to learn the true consequences of not managing money properly—until it is too late. For young people today, the inevitability of student debt means that a huge proportion start their adult lives in debt—a debt that many never repay. It is then difficult for young people to be hopeful about their financial situation. When they know they are in the red, how do they resist taking on more debt? How do they resist one more latte, when they know they will never be able to afford a house, and when there is no possibility of paying off their student loan for an awfully long time? Starting adult life in debt, which is now prevalent, is the worst possible foundation for a sound financial life. It also misleads young people, because other debts are not like that. If they take on a mortgage or take out a car loan, they have to pay it back regardless of their income and it will not be cancelled when they retire.

What do we need to do? Let us leave the issue of student loans for another day. As with all teaching of skills and values, education starts at home, and it is primarily the role of parents to show children how to manage money. We need to think collectively as parents about how we do that in a digital age. I am sure it is possible but it needs to be deliberate.

Board games are a brilliant way to learn, although Monopoly probably puts younger children off capitalism for life. Imagination Gaming, a brilliant group in my constituency, goes into schools and does board games with children. That teach them not just maths, numeracy and financial ability but collaborative and social skills. So board games are really helpful.

However, there is an important role for schools, as part of their duty to prepare people for adult life, and also to break the cycle in families where there is not sound financial management, so that that skill can then be passed on. I agree that adding the topic to the curriculum in 2014 was a good start but, as my hon. Friend said, it is not being delivered. Citizenship is often not taught by experts and is not examined. It is understandable, given the pressure schools are under, that it is not a top priority. So my suggestion, which is similar to my hon. Friend’s, would be to put it on the maths curriculum, each and every year, from foundation stage all the way to school leaving. If we start with simple budget calculations, by their mid-teens pupils can have an understanding of mortgages, interest, shares, bonds and pensions.

Money is all about maths and mental arithmetic, and children love handling money. As we have heard, and as I have experienced, children are very engaged when the lesson is important to their future lives. If we embed financial education in a core and examined subject in the curriculum, it will be taught. I appreciate that many teachers might need upskilling and their confidence boosting, but for many children it could make the difference between a confident, successful life and one of debt and misery.

We should also explore ways that schools can offer more practical experience, such as through young enterprise clubs or having an internal market for tuck shops and other such things. In my hon. Friend’s briefing, I read about the brilliant example of Queensmead Primary Academy in Leicester, which created an entire school market for its year 6 pupils.

We absolutely must see financial education as a core subject in schools and the home. Then we will be giving children the secure, firm foundation they need for a life, hopefully, of financial confidence and security.