About one in six of the British population is over the age of 65. By 2030, nearly one in four will be, and the value of state pensions will almost certainly have dropped. Careful financial planning is therefore essential for today's young adults.
Financial planning, decision-making and problem-solving are three important strands of financial literacy, and they are needed throughout life. Changes in employment patterns mean that people are likely to move between full-time, part-time work and unemployment. Their financial arrangements will need to be robust to cope with this. New rules on student funding also mean that young people going on to higher education will have to calculate carefully how much they need to borrow.
Over the past 10 years there has been a dramatic increase in the number of people with serious debt problems. Many factors have contributed to this, but money-management skills may have avoided such difficulties. Surveys, including one carried out in 1995 by the National Foundation for Educational Research, have shown that many adults lack these skills.
How, where and when should they be taught? Debt counsellors we interviewed for this survey felt strongly that money-management skills should be provided by schools. This would seem appropriate, given the current emphasis on literacy and numeracy, since financial literacy is related to both.
The links with numeracy are obvious, and elementary work on numeracy often focuses on money-based calculations. But the financially literate need to cope with words as well in order to make sense of mortgage details or loan-application forms. Practice while at school in interpreting "official" documents which involve a combination of words and numbers could prove valuable in later life.
The case for teaching financial literacy is a strong one, and I believe that most teachers would agree. Some feel, however, that while it may be desirable to teach financial literacy, it is not feasible to do so. The views of the teachers we have interviewed fall into three main groups: "I couldn't teach money management - I need lessons myself."
Many teachers lack confidence in their own financial literacy. One told me about the staffroom laughter which greeted the announcement that he was to run a session on financial planning. Minutes later, I observed him conducting a good lesson, based on Nat West Face 2 Face With Finance materials. After all, it is not unusual for teachers to deliver a subject outside their own field.
If greater knowledge is needed, it may be available from a bank or other financial institution. The Face 2 Face programme arranges for "partner" bank staff to go into schools and run sessions with teachers.
"The kids are not interested" It is sometimes argued that schoolchildren are too young to learn about money management. Certainly it would not be appropriate to cover pensions or mortgages at key stage 1, but some interesting, realistic role play can help older secondary pupils to appreciate the importance of financial planning.
Equally, some aspects of financial literacy can be tackled with younger children. Imaginative work can be based on the school shop, bank or trip.
"There isn't time to teach financial literacy."
This is perhaps the most serious objection. The curriculum is crowded, and even teachers who recognise the importance of financial literacy may have problems fitting it in. As one survey respondent said: "If we are not forced to teach it, it won't get taught."
There are opportunities within several national curriculum subjects to include work on financial literacy. Personal finance materials can be used in maths, technology, home economics and careers, as well as personal and social education and business studies. But much depends on the individual teacher's interest.
Some students may therefore cover several aspects of financial literacy while others may do very little. Including financial literacy in the national curriculum is, therefore, perhaps the only way to make it part of every young person's entitlement.
Dr Sandie Schagen is a senior research officer at the National Foundation for Educational Research. She has led a number of research projects for Nat West. Schools interested in taking part in the Face 2 Face programme should contact their local Nat West branch or telephone the bank's Financial Literacy Centre (01203 523952)
WHERE TO DRAW THE BOTTOM LINE
Financial literacy has been defined as "the ability to make informed judgments and to take effective decisions regarding the use and management of money".
Becoming financially literate means developing skills as well as acquiring knowledge. Some examples (not an exhaustive list) are given here.
They could be tackled at different levels and in different ways, depending on the age of the pupils and the curricular context.
* Skills Literacy and numeracy Budgeting
* Concepts Profit and loss Cost and benefits
* Knowledge Banking systems Sources of income