GCSE Financial Literacy?


Schools are struggling to deliver a substantial finance education to their students, is the answer to create a Financial Literacy GCSE? I've written a short piece stating my argument for this.

Currently, the UK education system lacks a comprehensive finance edification for their learners. Finance related topics are included in the national curriculum but with major inconsistencies across schools, allowing students to leave formal education with potentially inadequate education, as reported by the Money Charity. The parliamentary group on financial education found that only 17% of secondary school teachers received training or guidance on how to teach it. Also, The Young Persons Money Index reports that three-quarters of school leavers say they get most of their financial knowledge outside of school.

The financial market is crowded with complicated products and technical jargon hidden by the small print. Nevertheless, post-education, these young adults are thrust into the world and expected to navigate the financial market successfully and build a life for themselves.

For the majority, this system is not working.

The Money Charity reports that almost 13 million households in the UK have either none or less than £1,500 savings as of March this year.

People are struggling. 27,849 people in England and Wales were declared insolvent or bankrupt and 1071 homeowner properties were repossessed in the first quarter of 2020 (The Insolvency Service, National Statistics). The Institute for Fiscal Studies raised concerns for the current level of non-mortgage debt being £8,000 per household. This includes personal loans, credit cards, overdrafts and hire purchase agreements.

The statistics are worrying.

Queen's Belfast University found a direct link between money management skills and debt-to-income ratio. They studied Credit Union members on low income and discovered that those with high money management skills, had lower debt-to-income levels.

The high household debt position of the nation also impacts spending, causing a reduction in economic activity. A Bank of England paper found evidence that households with higher levels of debt reduced their spending on goods and services, as a proportion of income, by more than the average household during and after the 2008-09 financial crisis. In light of the recent pandemic, and the subsequent economic impact, there has been a drop in income as employees are either laid off or furloughed. 1 in 6 people are at least 3 months behind on bills or struggling to keep up with existing debt repayments (Money Advice Service).

What next?

Who is responsible for providing financial education to the nation? Employers, financial institutions, or the individuals themselves? It could be argued that all the above play a key role in helping the nation improve their financial literacy levels.

The school curriculum could include a comprehensive financial education syllabus and make it compulsory. Financial institutions and employers could do more to invest in educating and supporting the public and employees. Given the plethora of information available at one’s fingertips, people could take steps themselves to work on improving their knowledge of finance.

The Financial Lives survey of 5 million adults, carried out by the FCA in 2017 showed that 47% of 25-34-year-old show characteristics of potential vulnerability. Potential vulnerability identifies those who may suffer disproportionately if things do go wrong, those who may be less able to engage with their finances or with financial services. Before tackling the educational piece, one key element is persuading consumers that they need financial education.

Financial education is not purely about mathematics - it includes money management, financial planning, and the ability to make sound financial decisions. Given the findings by MAS, that attitudes towards money are typically embedded by the age of seven, starting this education in school may be the answer.