'All students, regardless of background, should be given information to help them make good financial choices'
Karen Kimura, learning and development manager at the Girls’ Day School Trust (GDST), argues that schools need to think differently about how to educate young people to manage money.
Last week, the media reported that leading city institutions have called for the government to include financial education in the primary school curriculum. We are increasingly seeing awareness of the need to teach students about finances from a young age. I recently heard Martin Lewis speak about the student finance system in the UK. He spoke with disbelief about the lack of financial education in this country, which leads people to make uninformed and sometimes catastrophic decisions. As a result, he is funding half a million Young Money textbooks for state schools. I am proud to have been asked to give feedback on a chapter of this book.
I feel strongly that all students, regardless of background, should be given information to help them make good financial choices to support this important role. We have introduced two workshops as part of the Girls’ Day School Trust (GDST) CareerStart programme: ‘Finance for University’ and ‘Understanding Money’. These programmes compliment the important work already being undertaken in our schools, across all ages.
The workshop on ‘Finance for University’ is framed around the famous Charles Dickens quote: "Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
No one – students or parents – understand the student finance system. Parents are never directly told by government ‘you must pay X’, even though the maintenance loan is based on parental income. Students don’t realise there is no correlation between what you borrow and what you pay back. Connected to earnings, NOT loan amount.
Students hearing about the student finance system are often interested to note that they would need to have a starting salary after university of approximately £38k, with above inflation pay rises at regular intervals during their career, and no breaks (e.g. for maternity) in order to be likely to pay back all of their loan plus interest. Anyone starting on a lower salary than this will not pay back all of the original loan amount, let alone the interest, within the 30 year time limit. Therefore, headlines berating the high interest rates of the loans are largely irrelevant for most students.
Do we need to question the moral responsibility of leading a generation of young people into significant debt without educating pupils about how the system might impact them in the future?
In the workshop we debate good debt vs. bad debt. Students conclude good debt is planned, affordable and for a significant purchase (e.g. education, house, suit for interview, car to get to work). They are shocked by interest rates charged by the cost of borrowing from Pay Day lenders such as Wonga. Years after the adverts were withdrawn, students still recognise the senior citizen characters, showing how much they had seeped into our consciousness.
Generation X and above grew up with the idea that you must work hard, then you can play hard in retirement. Young people are also very happy to work hard. However, they can’t imagine so far in the future, being able to purchase property or have save for a pension. This means that as well as working hard now, they also play hard now, leading to a generational disconnect and headlines such as ‘stop buying avocado on toast and you will be able to afford a house’.
For younger students, the workshop on 'Understanding Money' was put together as a result of student requests to learn more about finance. This workshop is built around the premise 'money is like fire'. A very useful tool, but misuse it, you can get burnt. We look at all the various things we need to budget for each month, including random things such as pet bills, TV Licence and toilet rolls! We share money saving ideas, and discuss the idea that buying nothing has become a radical thing to do in a consumer led society!
Having thought about how much we are likely to spend each month, students consider what they might earn to support this lifestyle. We look at salary levels for example jobs – waiter, plumber, barrister and medical practitioners. This leads to discussions about minimum wage, self-employment and work/life balance. Students are then asked to estimate how much money these roles actually take home each month, after deductions. The realisation is often too much for some, with comments along the lines of ‘I don’t want to pay that much tax!’ being very common.
If you ask students ‘who knows exactly what they have spent this week?’ The only ones who answer yes, are the ones who have spent nothing or very little. They don’t track in any way. Is this storing up problems for the future? Young students rarely receive pocket money they can put in their pockets. They get debit cards/pre-paid cards, usually contactless. They don’t have our experience of counting out coins to check they have enough for the cinema/sweets/stationery etc. you want to purchase. This means we have to think differently about how we educate young people to manage money. At the GDST, we are committed to providing not just a first-class education, but an unparalleled preparation for life to come. The CareerStart finance workshops are focused on encouraging students to research, ask questions and be proactive about managing their money – whatever career path they might choose to follow.