As savers queued outside branches of Northern Rock this week, I wondered: if everything that will be in the national curriculum from next year had been taught in the past, would fewer people have panicked? Would they have spread their savings around more? Or understood the risk-reward balance and realised that even a bank or building society isn’t entirely free of risk?
With a new focus on financial education in schools, the question is: how much of it is really education? Is it just information that will quickly become dated as the financial marketplace evolves?
I’ve taught personal finance to teenagers for the past five years. I’m not a trained teacher and haven’t worked in the financial sector, but I have a background of dealing with debt-related issues. To me, personal finance is as crucial as literacy and numeracy because money is central to our lives. It is not just a means of exchange but our primary motivation.
Consumer choice is bewildering and it is impossible to “try before you buy” financial products: all you can do is wade through the small print and hope you understand it. The way the finance sector works borders on the incomprehensible: I expect very few of Northern Rock’s savers would have understood the criticism that it had been behaving more like a hedge fund a charge levelled at it since the Bank of England gave the organisation a loan of last resort.
We must do more than impart information. We must show people how to cope with a fixed set of circumstances. We must do more than show them how to budget: we must also teach them how to choose a good bank account and use a credit card properly.
We must also teach teenagers to be true to themselves and not just how to be good consumers in a consumer society: they can only spend their money once and if they just spend like everyone else, they won’t be able to develop their unique potential. The subject must take people “outside the box” so that they can think creatively about their opportunities, evaluate marketing ploys and adapt to changes in the world.
Northern Rock’s crisis was unusual, but it wouldn’t have caused such panic if more savers had known that banks borrow from each other daily. No doubt people will have lost more in interest by withdrawing money than they would have if they had stayed with the bank and it proves to be insolvent.
Finance education should be as empowering as literacy and numeracy. We cannot pretend that it is enough to impart a few basic skills or else there is nothing to stop such panics, or people deciding that the best place for their cash is under the mattress.
