The Children, Schools and Families Bill recently passed into law. A number of clauses were dropped in order to ease the Bill's passage, one of which was the proposal that PSHE (personal, social and health education) become a statutory entitlement. PSHE education covers a range of topics from personal safety, financial literacy, unemployment, sex education and drug and alcohol misuse. I'd like to focus on one topic: financial literacy.
Labour had planned to ensure that all pupils receive high quality financial education from 2011. This is a valid goal. Children and young people (and adults as well) need to learn how to mange their money. Total UK personal debt at the end of February 2010 stood at a staggering £1464bn. This is one side of the argument for promoting financial literacy: to help people avoid racking up large sums of personal debt, to help them avoid - as far as reasonably possible - bearing the full brunt of recession with its sudden disruptions to income.
But there is another side too. Financial literacy and confidence with money is essential for people wanting to startup and run businesses. It benefits the entire economy. The Commonwealth Bank Foundation in Australia
conducted a 20-point financial literacy test with 5,000 16-65 year olds in 2004, and modelled the effects of a modest improvement amongst those whose scores were in the bottom 10% (the single largest proportion of whom were young people aged between 16 and 20) over a ten year period. It estimated that on average, annual incomes for this group would increase by AUS$3,204 and that Australia's GDP would increase by AUS$6bn a year as a direct result of increased financial literacy. In the UK, the Thoresen Review (March 2008) concluded that financial capability programmes could offer
savings of more than £15bn for consumers by 2060.
However, I'm very doubtful that merely making PSHE (with financial literacy) a statutory entitlement on the curriculum is good enough in itself. From recollection PSHE classes were tediously boring, a great number of the students didn't even bother to turn up, and those that did rarely paid attention to the teacher. That these classes won't improve levels of financial literacy is
supported by evidence from the US which finds that students who take a high school course in personal finance perform just as poorly as those who don't:
When the Jump$tart Coalition for Personal Financial Literacy first began measuring financial literacy eleven years ago, the term was literally unknown. [Average literacy score in 1997: 57.3 percent] Today, hundreds of organizations promote financial literacy, members of Congress introduce bills supporting it, a Federal commission promotes it, many states have passed initiatives and serious scholarly work is being published. [Average literacy score in 2008: 48.3 percent, its lowest score since it started measuring]
So how should financial literacy be taught? I would draw attention to a handful of brilliant approaches in this country; from the
Enterprise UK initiative Make Your Mark with a Tenner - which challenges young people to make as much money and social impact as they can with a £10 note in just one month and reached 30,000 students in its last round – to the
social enterprise MyBnk, which since its first pilot in January 2007 has reached over 20,000 young people. MyBnk's programmes include Money works - financial education programme designed to empower neet (not in education, employment or training) young adults to confront their money worries and gain financial control of their lives – and MyBnk-in-a-box – a banking scheme run by young people for young people providing an accessible place to save regularly and interest free loans to set up enterprises. And these programmes are successful: 77% of students felt confident or very confident about money and banking following MyBnk's Money Twist sessions, an increase of 30% on baseline levels.
Guaranteeing every child access to PHSE lessons will in all likelihood have little or no impact in improving financial literacy. How the Government can help socially-minded organisations such as MyBnk and Enterprise UK reach schools across the country on the other hand should be the Big Question. In a forthcoming publication, we will attempt to set out an answer.