The money programme

Most British children are financially illiterate and know little about mortgages, pensions, credit cards and debt. But that is about to change. Hilary Wilce on new moves in schools to prepare the young for the real world
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British children have traditionally not been taught about how to handle money. They have grown up oblivious to how the country earns its living and how they need to put money aside for a pension.

But this autumn new calls will be made for more to be done to teach children about money. In a new document, the Financial Services Authority will underline that building financial literacy in students is every bit as crucial as building their other basic skills.

Or maybe even more so, because today's youngsters face lives of terrifying financial complexity. They will have to manage student loans, dodge consumer fraud, switch jobs, hack their way through a jungle of competing financial services, and amass their own pension.

"The increasing scale of debt, and the fact that everyone is being asked to take more responsibility for more financial decisions, particularly for long-term savings and pensions, means there is an even greater need for young people need to understand their financial needs and to be able to deal with some very complex financial products," says Anna Bradley, director of the consumer division of the FSA.

The financial world has long foreseen the disaster that could follow from not educating the young about such things, and in recent years has produced classroom materials which make savings sound sexy and finance look fun. It has also lobbied to get personal finance on the school curriculum. Three years ago it achieved this aim. The subject now comes under the umbrella of citizenship, and personal, health and social education, and all schools in England have a duty to cover it. The subject is also on the agenda for schools in Northern Ireland, Scotland and Wales.

But the $64,000 question is how to get over-stretched schools and colleges to take this duty seriously when there is no space on the timetable, teachers don't know how to teach it, and students switch off at the first mention of the word "mortgage". Eighty-five per cent of 14- to 16-year-olds still go from one week to the next hearing nothing about the subject at all.

Howard Davies, outgoing chairman of the FSA, says the big task is to get more schools using the high-quality materials that it and other agencies have produced. These range from giant coins for primary children to discussion materials for older students on issues such as how genetic testing might affect insurance. "We also need to find ways of pulling financial literacy into other areas of school work, although this will be given a boost now the Government has accepted my recommendation to provide funding to allow all 14- to 19-year-olds the opportunity for five days of enterprise experience during the school year."

Ron Sandler, chairman of the Personal Finance Education Group (Pfeg), which promotes financial literacy in schools, agrees. "We are making headway, but it would be a large mistake to think the problem is dealt with. We have passed some important milestones, like getting financial literacy embedded into the curriculum. We can see progress, but we still feel that we're only scratching the surface. What we have to look at is how we make it easy for all teachers to develop confidence about teaching in this area."

Pfeg, a charity funded by the Government, the FSA, and the financial industry, is running a four-year project to help English secondary schools to develop finance education. This includes showing them ways to weave it into subjects across the curriculum.

"So, for example, in history you might look at financial issues in Victorian times, and in RE you might look at the morality of aspects of money, and in maths you can cover things like interest," says Tim Holmes, a pfeg adviser working with schools in Norfolk.

There are also opportunities at primary level, says Andrew Flatt, maths co-ordinator at Whitstable Junior School. He has helped develop personal finance teaching in Kent. "In design technology you are costing materials, and in geography things like currency and standards of living come up. If teachers are just told, 'By the way, you've got to include this in the curriculum now,' obviously they're going to say: 'Oh no, not another thing!' But if you point out that they're doing a lot of it already, that it's often just a question of adding a few things, and that you are addressing issues which children find really relevant to their lives, they take it up quite easily."

And children enjoy it. "All children like talking about money, including those who find abstract learning difficult and prefer dealing with the real world. If you talk to them about pocket money it really gets their interest. And they know far more about things than you think they do. Of course, sometimes it can be sensitive. But if you get someone saying, 'We're on benefit,' you can always widen the discussion to talk about the kinds of instances where the Government will provide people with money. What you're doing all the time is building an awareness of how the system works."

But at secondary school subjects get more complex and many teachers balk at teaching topics such as global trade and how the stock market operates.

George Abbot School in Guildford held a Citizenship Day, concentrating on financial and economic awareness. Assistant head teacher Sue Medley says it was "because we knew these were areas of the curriculum that we weren't covering in as much depth as others. Teachers don't necessarily know that much about it themselves, and we don't have the contacts to get people into school to talk about it."

During the day, the school's year 10 pupils debated where to site a new factory, played a Monopoly-style "Billionaire Business Board Game", studied international trade, and devised packaging and marketing ideas for a soft drinks company. "We were just about to go off on work experience, so it was good to have to do things like look at financial figures," says Ben Wallace, 15. Afterwards teachers said they felt much more confident about tackling this part of the curriculum.

However schools need to be cautious about where they turn for help. Some businesses push out to schools materials which are designed specifically to hook in young clients, while aid and environmental agencies have their own spin on issues such as trade and international debt. Because of this, Pfeg has developed a quality mark which guarantees that materials have been vetted.

The educational world knows that in the end the nuts and bolts of learning about finance are much the same as learning about anything else. "If we are going to prepare people for life, that must include how to manage money. But we can't know how the world of finance is going to look in 20 years' time," says Jan Campbell, consultant on personal, health and social education, and citizenship at the Qualifications and Curriculum Authority, "So what we have to do is encourage students to enquire and find out, and to know where to go for help."

'So why are you giving the Government money? Taxes!'

The scene on the playing field was wild. The economy was in full swing. Money was passing from businesses to banks, from banks to families, and from families to the Government ­ although the money was tennis balls, and the institutions plastic buckets. Maths teacher David Brader was hoarse as he prompted students to think about what was happening. "Why are businesses giving you money? That's right, wages! And why are you giving the Government money? That's right, taxes!"

Some students at Aylsham High School, in Norfolk, had thought a day studying personal finance would be dull, but they were wrong. A carousel of workshops, games and activities kept their interest right up to the final bell. On the sports field they followed a treasure trail, figuring out from clues which was their most lucrative way around the course. A workshop on budgeting had them scratching their heads over how to make a family's income stretch to both food and fags. In the home economics room they traded their money for Euros, learning the hard way about the swings and roundabouts of exchange rates. And there were even harder lessons in the global trade game, where market conditions shifted so abruptly that one minute triangles were trading high and circles low, and the next rectangles were the thing that everyone was scrambling to produce quickly.

"I've learnt a lot about how money can go up and down," said Daniel Laddiman, 12. "I didn't know it could do that, but I do now. They've taught us in a really fun and enjoyable way. Now if Dad says we can't afford something, I think I'll be a lot more sympathetic. Before I just took money for granted. Now I want to save it."

The day was set up for the school's year seven pupils with the help of the Personal Finance Education Group, which supports the development of financial literacy in schools. There were also helpers from Barclays, HSBC, and the Citizens' Advice Bureau, which is keen to teach children about money because it knows at first hand the problems that arise from personal debts. Currently these run at an average of £2,500 for every man, woman and child in the country.

"We've done a lot of work working with local businesses, we've just been awarded specialist business college status, and we're looking on this day as the start of something for next year," said deputy head Julie Ward. "We are determined to get our students to think about finance, and how to be entrepreneurial. This is a big rural catchment area, with very small villages, and some of our children don't even really handle money. We want to develop their enterprise thinking. We want to make it so much part of the culture that they are thinking in this way without even realising it."