Consumer Rights: We all need a good dose of financial education
The charity-run My Money Week, which starts on Monday, is a good way to begin learning
Saturday 01 June 2013
After decades of flexing the plastic, applying a 'buy now, pay later' model to shopping and ignoring the small print, we can hardly be surprised that many people have little understanding of how to manage their money. Budgeting to pay the bills when they come due, saving in advance to buy things we need or desire, putting money aside for the inevitable rainy day – why should any of that make sense to generations brought up on instant gratification and debt?
Our lax attitude to money, and our tenuous grip on the principles of its management, has left us vulnerable to a variety of scams, cons and get-rich-quick schemes. While many financial organisations have been guilty of irresponsible lending, applying pressure on consumers to borrow and engendering a 'have-it-now' culture, we're also partly to blame for our own money woes.
It's time to get a grip on our finances, sort out the debts and take responsibility for our financial futures. That's what lies behind My Money Week, which starts tomorrow in schools all over the UK. It is run annually by the charity PFEG – the Personal Finance Education Group.
But where do we start to reverse the trend? For many people, it's too late to save for a more comfortable retirement or avoid the health problems induced by deep, unmanageable debt. So we need to start at the beginning. Campaigns to have financial education added to the school curriculum have been running for years.
Research shows more than three quarters of the population believe young people should be taught financial planning in schools. If you want people to be savvy savers instead of thriftless spenders, you need to get them young and keep them on side throughout life. Financial education leads to financial literacy and capability, and in turn to financial well-being.
Financial illiteracy in the UK has over the years contributed to our current economic crisis and to pension, endowment and PPI mis-selling scandals, to name but a few. The PFEG equips young people with the knowledge, skills and confidence to see when they're being sold a pup and to manage their money well.
Our lack of financial know-how costs the UK taxpayer £3.4bn each year, according to the Centre for Economics and Business Research. If we had better money skills, fewer of us would be unemployed and living on benefits. We'd save up for our retirement and reduce the bill for the taxpayer by a third, and our personal debts would be lower, saving us money on interest payments. More money could be used to help fund small businesses, which would contribute to the UK economy, and we'd know better than to sign up to poor deals that leave us worse off. If the calculations included scams, fraud and the bill to the NHS because of poverty and mental health problems, the figure would be much higher.
Financial education is crucial for financial security for families and the economic well-being of the country. Financial education will be included in the compulsory national curriculum in England from 2014 when it will become part of citizenship for 11-16-year-olds. Citizenship education equips young people with the knowledge, skills and understanding to play an effective role in public life. Currently, pupils learn about their rights, responsibilities, duties and freedoms and about laws, justice and democracy but there's nothing covering personal finance. The final version of the curriculum will be with schools by September.
Pupils aged 11 to 14 will be taught the functions and uses of money, the importance of budgeting and money management. Those aged 14 to 16 will be taught about wages, taxes, credit, debt, financial risk and a range of financial products and services. But even with financial education on the agenda for schools, parents are the most influential people in their children's lives and financial education at home is important.
Many parents feel they don't know enough to talk to their children about money, but they don't need to be experts. If they do talk to children about savings, budgets, debt and peer pressure, it helps. Many aspects of responsible money management are best learnt in real-life, and schools can't deliver that. But lessons can also be passed from children to parents, and often what's learned at school can make a difference to how money is managed at home. Financial education can create winners all round. You can find out more about My Money Week at www.pfeg.org
Q: My boiler broke down, and had to be replaced. The company that installed it put pressure on me to take out insurance. I signed but now I'm wondering if I need it. It's about £160 a year, and I feel I've been pressurised into buying something I don't need. Is there anything to stop me cancelling? FK
A: Last year, a fifth of boilers broke down and cost on average £320 to fix, according to comparison site uSwitch.com. So having insurance could save you money. But you need to check what's included in the policy. Most cover repairs, parts and labour, unlimited cover and claims throughout the year, and an annual service. Some policies cover your whole heating system, most have exclusions. You may also have to pay the first £50 when you claim, or a £50 call-out charge. A good reason for cancelling your policy would be it your boiler is already covered under your home insurance. If not you may be able to pay a bit extra to get emergency boiler cover cheaper than you're paying for your standalone policy. You could put the £160 a year into a savings account and build up a 'self-insurance' fund. If you do decide the policy isn't good value, check the terms and conditions for the cancellation.
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