9 January 2023

The Government has two golden opportunities to boost financial education

By Matthew Greenwood

Rishi Sunak’s plans for compulsory maths education to age 18 have gone down badly with people who didn’t enjoy the subject at school, but numeracy isn’t just about solving abstract puzzles, it’s essential for managing our personal finances. Our children are facing a more complex financial future than ever before, with new products becoming available all the time. So the Prime Minister should go even further than ‘maths today’, and introduce mid-life MOTs tomorrow, to help Brits navigate this changing world.

Let’s start with maths. From APR to Buy Now Pay Later, an ever-changing environment with a multitude of new goods and services grants us freedom with our finances. These services help us access funds for important items, find the best deals, and borrow a bit when we need to smooth over our finances.

But even well-regulated financial products can cause harm and lead us into personal debt when used inappropriately. Taking advantage of this freedom and managing the attached responsibility requires some know-how.

But we’re not there yet. At the moment, our financial education offer is under-preparing children to manage their financial lives, with the UK falling behind other major G20 countries, including France, Canada, and Germany, on financial literacy. Many people struggle with their finances and polling for the Centre for Social Justice (CSJ) shows that an astonishing 46% of adults with experience of financial difficulty believe that low money management skills contributed to their issues.

To improve this, the Government introduced financial education to the national curriculum for secondary schools in 2014, but too many children are still not receiving high-quality financial education. Two thirds of teachers believe students leave school with a poor level of financial education.

Practical knowledge, such as how individual financial products work and how to build savings habits, should be integrated into Sunak’s new maths offer and taught in both sixth form and further education settings. As the Financial Conduct Authority shows us, young people are some of the most likely to use credit, but least likely to be confident in managing their money. A greater focus on financial acumen in the later school years can help to stop the all too common time lag between leaving school and figuring out how the world actually works. Better still, these skills can be transferred from a retail to a business environment, helping prepare school leavers to enter the world of work and to innovate.

This need for knowledge filters into our later lives too. For example, not many of us were in school when Buy Now Pay Later exploded. The Government has an opportunity to take action here, too. With the Government seeking to coax many of the over 50s who have departed the labour market back into work, Sunak’s second golden opportunity to improve our financial literacy is through mid-life MOTs.

We already accept the need to teach kids about the importance of understanding how to use money well, but if we are honest, most of us could use a refresher too. For instance, a third of Brits don’t know how to check their credit score. Even more seriously, almost two thirds of us are not set to save enough into our pensions to provide us with a decent income in old age, often because we don’t realise just how much we need to put aside.

Free online mid-life MOT courses to help people in their 40s and 50s plan for the future could prove another touch point to add to our stock of financial knowledge, alongside exploring avenues to improve earning and saving potential. It would equip people with both the knowledge to plan for their future and the skills to take their finances forward. Better still. By exploiting this opportunity with adults, the knowledge should even trickle down to future generations, helping prepare young adults for the future.

Without the knowledge to get us through our day-to-day lives and make the best of financial products and services, we cost ourselves money in both the short and long term. A lack of financial knowhow also risks depriving us of the time and opportunities to do the things we enjoy, or start a business because of the need to make up for a sometimes self-imposed shortfall.

Picking the wrong loan, misunderstanding payment plans, and not knowing how to check our credit score, let alone improve it, are preventable errors. Through better financial education we can learn to be street-smart with money. Fortunately, Rishi Sunak has two golden opportunities to help all of us gain a bit of financial nous and it would reap dividends – at a time when every penny counts.

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Matthew Greenwood is Head of Debt at the Centre for Social Justice.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.