By Elliot Guthrie
Over my thirteen years in school in the UK, I learned about everything from Pythagoras' Theorem to Ohm's Law to how glaciers shape valleys. However, in day to day life, most people tend not to find themselves needing to explain how interlocking spurs are truncated by a glacier to form a U-shaped valley. But one thing that everyone needs on a daily basis is a solid understanding of money and personal finance.
Before I pursued my career professionally, I think the most personal finance education I ever got was a singular lesson on budgeting by the Home Economics teacher, but this was incredibly basic and was taught far too early to be retained. In my final year of school, our teachers asked us if there was anything we'd like to specifically cover during our guidance lessons. Overwhelmingly, people wanted to know about mortgages, how interest works, budgeting and the like, but these suggestions were ignored and we were left to our own devices.
Looking back, there was a unique opportunity to impart practical knowledge on to a willing crowd, and the opportunity was wasted. I suspect this was partly due to the fact that my school had a pre-determined curriculum, and partly because the teachers may not have felt comfortable in their ability to teach the subject.
I believe my experiences are not uncommon. People are leaving school with no real understanding of how things like credit cards work - worrying considering 17% of adults rely on credit to pay bills or put food on the table. This reliance on credit may not be such a big issue now in a period of historically low interest rates but could easily leave many destitute if rates were to rise sharply.
Research from the Financial Capability Strategy for the UK found that 52% of 7 to 17-year olds did not receive a meaningful financial education at school or home. This lack of education starts a vicious cycle of children growing up not learning about personal finance from their parents or teachers, and then being unable to teach their own children about personal finance.
The lack of financial capability amongst working age people, particularly when it comes to planning for the future, is a major concern as the data suggests that 39% of adults don't feel confident managing their money and that 11.5 million people in the UK have less than £100 in savings.
This last statistic is especially pertinent for my own generation (Gen Y), and the generation before (Gen X), as these groups are highly unlikely to benefit from generous defined benefit pension schemes that require little understanding from the member point of view. Instead, my generation will be saving for retirement in defined contribution pension schemes which come with the risk of not contributing enough to provide a comfortable retirement.
The government is trailing are a number of initiatives to improve financial capability and comprehension across the UK.
These range from government schemes such as the Financial Capability Strategy for the UK, which aims to improve people's understanding of personal finance at all ages, from improving the curriculum in schools, to encouraging employers and benefits agencies to provide more information to employers and claimants.
But another non-government initiative is the Personal Finance Society's drive to get more financial planning professionals to present to local schools, delivering the knowledge that teachers are not delivering to pupils. These lessons provide age-appropriate materials for different year groups to provide relevant lessons, starting with budgeting and basic planning for the future. The curriculum then progresses to understanding income tax, payslips, and information about the different kinds of financial risk.
There is nothing stopping people from contacting local schools, organisations and charities and delivering a short presentation on basic personal finance. This volunteering can be massively helpful to those who may be missed by some of the larger initiatives and can be very rewarding for those delivering the content.
Personally, last year, I delivered some basic workshops on budgeting and basic money management to a group of carers in Glasgow, in response for giving up just a little of your time, you can make a difference to someone's life.
Elliot is a paraplanner and associate financial planner with Create and Prosper Financial Services, a firm of Chartered Financial Planners based in Kirkcaldy.
