Recently, I was charmed to come across a piece in Mortgage Strategy dedicated to my niche, specialist, yet vital area of expertise – financial education.
Phil Whitehouse, Managing director at MCI Mortgage Club, had penned an article motivated by the same hair pulling, no brainer sensation felt by many in the various solar systems of financial services. His piece also touched on areas the industry could be better informed on and left open the role it could play in helping prevent poverty.
The annual cost of a lack of financial literacy in the UK is estimated at £3.4bn when taking into consideration poor decision making related to personal debt, unemployment, retirement and miss-selling. The mortgage industry’s concern in these matters is no different than an IFA, pension broker or banker.
The cynics amongst us would think businesses might prefer financially illiterate customers who can be duped into products they do not need on terms they can ill afford. Yet I think this industry knows, better than most, that the road to perdition can be paved by miss-sold credit impaired services. The better able a customer is at managing their finances, the likelier it is they will meet their repayments and thus reduce the risks of bad debt, a cost borne by consumer and trader alike.
So, financial education is not in itself a selfless act, it is however a sustainable one. The argument, that we should teach young people how to manage their money, has been widely accepted by policy makers and civil society. The conversation now, however, is how.
State of play
Money lessons are taught in UK schools. It has now been a compulsory part of the secondary national curriculums of Wales, Northern Ireland and Scotland since the turn of this decade. Last September it became statutory in England but only up to GCSE level in state maintained schools. So academies and free Schools – around 50 per cent of schools – do not have to teach it. Elements are embedded in citizenship studies and maths but students will only be tested in matters related to public finance.
Teachers need our help. A Nationwide study showed just 29 per cent of them taught it in 2014 and two-fifths think it will not make a difference to the way children view money. The situation is not entirely satisfactory, but more young people are being exposed to these issues. The questions we should be asking is around quality and sustainability.
Let’s be honest. Money, bills and insurance – these subjects can be boring, frankly. Keeping the attention of young people is hard. This is the problem facing the financial services industry in trying to make an impact with experts who are not teachers and teachers who are not experts.
Role to play
The financial services industry does have a role to play, its insights are invaluable but how it currently engages with these subjects leaves us all stuck in first gear.
The wonderfully honest example Phil gave of the local bank branch “giving something back to the community (while, of course, getting customers signed up at an early age)” is exactly what stops teachers and parents bringing in the outside expertise they desperately need.
For example, this year MyBnk are working with building societies to evaluate their youth financial literacy efforts across the country. Are they working? What is on their curriculum? Are they impartial and, ultimately, speak to young people?
We believe schools need support to teach these lesson but it does not require a big brand to make it effective – there is more than one way to teach young people how to manage their money and make informed financial choices.
Forget no go areas, there is nothing inherently bad about the financial sector being involved. If it is unbranded and effective, we support it – just have a look at our funders.
However, rather than having a multitude of financial services and banks duplicating efforts, as has been the norm for decades, the financial sector can help by supporting and funding research and the delivery of independent, expert-led and certified programmes.
Continuing to work in silos will get everybody nowhere. We need to be in lock step from the classroom to the boardroom and the shop floor. The Money Advice Service’s new Financial Capability Strategy provides a road map and sets up pilot projects in this regard. Also, the Financial Conduct Authority is bringing together stakeholders to tackle the issue of indebted youth.
MyBnk is happy to talk with anyone to advance our shared mission of creating a financially literate and resilient generation.
Declan Wilkes, head of communications, MyBnk, a charity that delivers financial education to 11-25 years olds