From education to employment

Teach 7-year-olds how to pay bills, says CSJ to improve financial education in adults

Robert Halfon MP, Chair of the House of Commons Education Select Committee

Most adult money habits set by the age of 7 according to the Money and Pensions Service. The CSJ believes radical change is needed in the classroom to tackle the problem Primary schools should be required to provide lessons in money management to pupils, according to a new report on the parlous state of financial education in modern Britain.

Commissioned by the Centre for Social Justice (CSJ) in partnership with Lowell, and endorsed by Education Select Committee Chair Robert Halfon MP, the report finds that 14 million adults with experience of financial problems believe that low money management skills had contributed to their plight. With most adult money habits set by the age of 7 according to the Money and Pensions Service, the CSJ believes radical change is needed in the classroom to tackle the problem. 

Other findings in the report On the Money: A roadmap for life-long financial learning, which involved a nationally representative poll of 4,000 adults by Opinium, include:   

  • Nearly half of the population (44 per cent) believe that more financial education would help to improve their financial situation;
  • Over two thirds (68 per cent) of young people (aged 18-34) with experience of financial problems believe that low money management skills contributed;
  • Half of Brits failed a financial literacy test run by the OECD in 2016, putting Britain well below France, Norway and Austria, and only just above Thailand and Albania 
  • Twenty-four million adults report not being confident handling their money day to day; 
  • Only one in three children receive financial education at primary school, yet financial literacy disparities between children in different socio-economic backgrounds are already pronounced by the age of 11; 
  • The introduction of financial education on the national curriculum in 2014 in secondary schools in England has not translated into all pupils receiving adequate financial education; two thirds of teachers believe that students leave school with a poor level of financial understanding.

As the internet has become an established part of life for children from an early age, with nearly all children between 5-15 going online in 2020, the report found that the lack of financial knowledge among children is posing unprecedented risks. For those aged 8-11, digital spending within online marketplaces and mobile games has hit record highs and according to the National Audit Office as many as 55,000 children aged 11-16 were found to be ‘problem gamblers’, with an additional 85,000 at risk.

Poor financial education in school years leaves young adults exposed, particularly amid a rapidly evolving financial market where new risks crop up all the time. The inquiry heard that one in eight young adults who have taken out a “buy now, pay later” credit agreement ended up being contacted by a debt collector.

The report also found that learning how to manage money is a particular challenge for children from the most deprived backgrounds. The CSJ present evidence showing that children from low-income backgrounds are less likely to receive pocket money, and therefore have fewer opportunities to develop positive spending and saving habits. The accelerated move to a cashless society combined with fewer poorer children having online bank accounts has also reduced opportunities to practise money management from an early age.

The CSJ cite evidence showing profound geographical disparities in financial skills.
The inquiry heard that 76 per cent of schools with children most in need of financial education, as defined by the charity MyBnk, are in areas of high deprivation. Heightened levels of financial vulnerability in the Midlands and North of England post-pandemic, as revealed by Lowell and the Urban Institute’s Financial Vulnerability Index, suggest the additional need for better financial education in areas key to the Government’s levelling up agenda.

The CSJ recommends that lessons in money management are added to the national curriculum for primary schools. There should be a legal requirement for such lessons for youngsters in secondary schools (via PSHE).Current arrangements mean financial education is, according the report, “woefully absent” for the most disadvantaged.  

The report calls for dormant assets in banks, insurance, pensions and building societies – the scope of which will shortly be expanded to raise another £880 million – to cover the cost of rolling out financial education for all pupils aged 7-11, which is estimated at £32 million per year. By comparison, one estimate found the lack of financial education to cost the UK as much as £3.4 billion annually.

There are 28 recommendations in the report, including:  

  • A new legal requirement for pupils to receive at least three ‘experiential’ financial learning lessons across their school career;
  • A new ‘whole-family’ approach to financial education, recognising the role of parents and carers in developing financial literacy, using community infrastructure like Family Hubs;
  • New funding for care leavers and disadvantaged young adults to attend ‘just-in-time’ financial education programmes to reduce cases of rent-arrear driven homelessness among this vulnerable group;
  • Integrating adult financial education as part of the Government’s £560 million adult numeracy scheme, Multiply;
  • Better promotion of employer financial wellbeing policies to capitalise on ‘teachable moments’ across people’s working lives and promote the Help to Save scheme to increase uptake among those who are eligible;
  • The completion of the welfare reforms initiated in 2012 by rolling out ‘Universal Support’, an into-work programme which includes support for the most vulnerable in society to develop digital and financial skills.

Robert Halfon MP, Education Select Committee Chair, said: “The ‘soft’ skills which we too often denigrate in fact aren’t soft at all. Indeed, they are skills for life.

“This report shows how those leaving school without an effective financial education are at high risk of financial abuse, fraud and debt. Yet today only one in three children currently receives any form of financial education at primary school.

“We must be bolder – critically, by adding financial education to the curriculum in primary school in PHSE lessons where money management remains absent in England. Adults of all ages also need opportunities to develop critical financial skills throughout their life, whether that be in the workplace, further education or via the welfare system.

“This new financial education offer is needed to build the resilience in our society and our economy that buffers against cost-of-living crises when they appear.

“Preparing our young people for a world and workplace with high demands of them means taking skills seriously. And money management skills are no exception.”

Joe Shalam, Policy Director at the CSJ, said: “When Martin Lewis says he has ‘run out of tools’ for households struggling to make ends meet, any suggestion that financial education alone is the answer to people’s financial woes would be rightly dismissed as unrealistic.

“But it would be equally short-sighted to brush aside the important role played by financial literacy, skills and decision-making in supporting families to achieve financial wellbeing over the longer term.

“Too many children leave school without the basics, while young adults contend with a world of fast-evolving financial risks. Our report provides Government with a roadmap to improve financial education across the lifespan, which we hope ministers will adopt as part of welcome ambitions to build a high-skilled economy.”

John Pears, UK Chief Executive at Lowell, said: “With the cost of living increases hitting home, financial literacy would be a strong barrier. Unfortunately, we just aren’t good enough at it in this country.

Our own customers have told us how ill-prepared they felt to deal with debts. The lack of financial literacy and budgeting skills creates spirals of debt that are hard to break and have a long-lasting impact, individually and on our economy.

We need to look at radical change, over the course of people’s lives, to ensure that everyone has the skills to manage their money and navigate modern financial products. We need to build proper financial resilience in the UK.”

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