Teaching children about money makes smart financial sense

Schemes and school programmes can help young people learn to make ends meet

as the new school year kicks in, it's the one subject that still isn't guaranteed to appear in your children's timetables. Teaching children about money is regularly cited as a critical part of their education, and over 90 per cent of teachers and parents believe financial education should be taught in schools, according to the Personal Finance Education Group (PFEG), an independent charity which helps schools and teachers plan and teach financial capability.

Despite popular proposals for compulsory financial education in schools from 2011, the idea has since been deferred with no news on when, or if, it will be formally introduced.

But with the recession exposing children to the realities of money issues, over half of the UK's teenagers falling into debt by the time they are 17, and this year's freshers heading off to university with loans burning a hole in their pockets, parents increasingly feel they cannot afford to wait.

They are turning to banks, charities and volunteering financial advisers to help inform the next generation of adults. So where can Britain's teachers and parents turn for assistance?

At school

As it stands, financial education can be taught as part of a school's personal, social and health education (PSHE) curriculum, but even that isn't a compulsory subject.

And although 90 per cent of teenagers say they worry about finances on a daily basis, some schools seem unconvinced about the value of teaching children about money.

"Since the credit crunch there is a great deal of discussion on educating the adults of the future about responsible finance," says Kevin Tooze, a former teacher who is now an independent financial adviser for Equity Partners. "Sadly, most institutions and schools offer little or no basic training of real value. I have offered schools free lessons on finance for 11-year-olds and above. They covered topics such as interest, tax, banks and building societies, Mum and Dad's mortgage and what a share is. I contacted over 40 schools and not one responded."

Wendy van den Hende, the chief executive of PFEG, said that just because plans for compulsory financial education have been put on hold, it doesn't mean schools have stopped teaching students about money.

"Schools should offer a cohesive planned progression of financial education from the age of four or five right through to 18, and not all are doing the right things or doing them well enough," she says. "Parents should ask their child's school what their plans are on the subject. Are they using financial situations as contexts in maths lessons? Is financial health being included in the school's PSHE classes?

"If children are not equipped with the right skills, they will have a miserable time, learning financial lessons the hard way and making some horrendous mistakes."

But there are plenty of businesses and organisations out there willing to help prevent those mistakes. PFEG (www.pfeg.org) provides free support, resources and consultancy to teachers and school leadership teams from more than 3,700 secondary schools.

Banks and other financial services providers are becoming increasingly involved. NatWest's MoneySense scheme (moneysense.natwest.com) is the largest of its type in the UK, working with more than 3,500 secondary schools to offer modules on financial and business education. The programme is impartial but, for those who prefer a consumer-focused approach, the Consumer Financial Education Body (www.cfebuk.org.uk), run by the Financial Services Authority, offers financial education presentations to schools as well as workforces through its Money Made Clear programme (www.moneymadeclear.org.uk)

Elsewhere, local authorities have teamed up with smaller organisations to link financial specialists with local schools. Colin Jackson, an independent financial adviser for Baronworth Investment Services, has been volunteering at schools in and around the east London borough of Redbridge for more than 15 years.

"During term-time, I take a class for older children for an hour every month," he says. "I've been doing it for a long time but it still amazes me how little the pupils know about basic money issues such as saving, opening a bank account and budgeting. I feel quite strongly that financial education should become part of the compulsory curriculum to try to help these kids."

At home

Making the most of everyday activities at home can also make a big difference, adds Ms van den Henke. "Give your children as much discretionary spending money as you feel comfortable with as early in their lives as possible," she says. "It should be a monthly rather than weekly allowance, and you should allow them to make their own mistakes without rescuing them.

"If they spend it all in the first few days, and have to stay at home for the rest of the month, they will quickly start to think about planning for the future and budgeting.

"Once they've learned that lesson you can then help them create budgets and talk about saving for the things they want."

Bringing children into everyday financial decision-making is equally important, she adds. Explaining the financial constraints on an outing, holiday, or shopping trip and getting the child involved in finding appropriate solutions that meet the circumstances can all help build understanding and responsibility.

Case study: 'My pupils talk to their parents about debt'

Alison Dootson, 43, helps teenagers to learn about money in her role as a financial services teacher at Darrick Wood School in Orpington, Kent.

With a background in the finance industry, she switched to teaching after the Government made its original pledge six years ago to promote financial education in schools.

"Not only are we creating financially competent young people, but they are also gaining formal qualifications from GCSE to A level," she says. "I know I've got pupils who understand money and debt, and the difference between good and bad debt. They go home and talk to their parents about it, and often come back into the classroom raising questions that relate to their family finances.

"We can then base our discussions in class on their real scenarios, and that means we are helping the whole family. It's too late to change the habits of those in the middle stages of their lives, but the decision to shelve compulsory financial education means we are turning our backs on developing financial competence in our young people despite the worst financial climate for decades.

"But some of our former pupils are now doing financial services degrees or working in the City, and they are taking the financial responsibility they learned in school with them, helping to improve the financial health of our whole society."