In the past, we have left parents to educate their children on various aspects of personal finance. It’s becoming increasingly obvious, however, that educational establishments could and should play a more active role.
In fact, this is a vital component for the future financial health of our young people.
Legislation was introduced in 2014 to include financial education in maths and citizenship. Prior to this there was little in the way of a coherent strategy in our schools. Limited resources and a lack of confidence played a significant role in this, with two thirds of teachers saying they don’t feel comfortable teaching the subject.
Confidence with personal finance is a lifetime pursuit and the sooner we start learning the better.
There’s no doubt that new ideas are being embraced and the old ways of providing education on handling money challenged. Younger teachers, the so-called millennials, believe intrinsically there should be provision in the curriculum for financial education. Older teachers are more likely to believe that it is the job of parents to educate their children in this respect.
Learning how to budget properly, understand things like interest rates, ways to plan for the future, and take more control of your financial situation is as important as any other skills taught in school. But becoming financially capable is no longer an option, it is a necessity.
The World Economic Forum have, in fact, declared it a “critical 21st century skill”.
Finance has become more complicated
It used to be that we had one destination for all things money – the bank – and you stayed with them for most of our lives. The financial infrastructure today is beginning to change dramatically. There are payday loan companies, different ways of financing through new online sources, a multitude of platforms that allow us to pay in different ways and increasing challenges to keep track of our finances, not to mention insurance deals and phone billing.
There are savings plans and pensions that young people need to understand if they are going to make informed decisions.
Milestones are tougher to reach
Pressure for young people to manage their finances more efficiently have increased, many just don’t know it yet. The employment market has got harder for new school leavers and graduates. Not only are houses more expensive, to both buy and rent, but the cost of living continues to increase.
Being able to budget on a limited income is difficult at the best of times but if you are not used to it and have not been expecting it then the pitfalls are numerous and sometimes catastrophic for future social mobility.
The workplace isn’t the safety net it once was
We are becoming more entrepreneurial, mainly because of innovations such as smart phones and online shopping have made it easier and cheaper to set up a business. For individuals who chose this life path, managing financial situations, particularly operating budgets, is important and needs more in depth tuition than simply a little advice from the parents. If we want our children to hit the ground running then they need to be educated in a range of financial matters.
Financial knowledge is financial power
If we have seen anything from the release of the Panama Papers it is that the wealthy rely on advisors to get the most out of their money. Whether you agree with these tax havens, or not, the fact remains that exploiting tax loop-holes to minimise a tax bill is legal.
But to know this the wealthy rely on financial advisors, tax experts and others. Most of us don’t have access to this kind of expensive advice but in this information era, knowledge is available to everyone. An ISA is a tax avoidance tool but 77% of the population don’t understand how it works!
An independent financial advisor may be worth the expense when tackling some of life’s most significant financial decisions like mortgages, pensions, wills etc.
Starting young and developing a good understanding of financial matters is important if we are going to empower our young people for the future.