Personal debt has reached record levels in the UK. Latest statistics show that people in the UK owe £1.58 trillion. This is up from £1.53 trillion in 2017. This means on average that each adult owes an extra £1,169.92 in 2018 compared with 2017. The findings also show that the average total debt per household – including mortgages – is just over £58,000.
To have an understanding of the importance of budgeting and the impact and real cost of debt is an essential life skill. And one primary school in the UK is trying to tackle this issue head on. It has set up its own bank to teach children about money. But is it the school’s job?
The government thinks so – financial literacy has been part of the national curriculum in English schools since 2014. But even then, this curriculum is not compulsory in academies, private schools and faith schools, so some children could miss out. And a recent OECD report found that the UK is below average when it comes to teaching the subject.
At the moment, teaching pupils about financial matters forms part of the citizenship programme, where it sits (somewhat uneasily) between sexual health, drugs and anti-bullying. There may be a case that these are more critical issues for many schools, but sound financial management can be life-changing. There have been many studies on the impact of debt, and especially debt arrears on mental health.
At the moment, the national curriculum requires children age 14 to 16-years-old to be taught about savings and investments, insurance, pensions and mortgages and financial products. Many schools may miss these subjects out on the basis that their teachers are simply not qualified to teach what is essentially a pretty specialised subject. Financial literacy is not part of teacher training programmes.
Some of these topics may also not necessarily be appropriate for all children – something which is potentially a particular issue for children from Islamic backgrounds. Riba, or interest, for example, is forbidden under Islamic law, so products such as insurance or mortgages are not acceptable to many families.
Read more: Explainer: how does Islamic finance work?
Many high street banks are now setting up separate divisions and developing Sharia compliant finance products to take account of this.
But the teaching of financial literacy in schools does not accommodate it. Nationally one in 12 school children in England and Wales are Muslim, with up to 80% in some areas, such as parts of Birmingham. Teaching these children about conventional financial products would surely be wrong and against the parents’ wishes.
But not teaching the subject in schools could be potentially disastrous for these children’s future. Parents who don’t have a good grasp of financial issues themselves will perpetuate the lack of understanding, and the next generation will face the same problems as the current one. This means that children would grow up excluded from sound financial management and potential for financial security, because their parents don’t understand it and neither do they.
The answer then, must surely be to focus on the basic skills of budgeting and debt management as part of GCSE maths – where it will be much more useful than trigonometry. If children grow up confident with the basics they can find out what they need to know in future. Sixth form colleges should also cover any elements of financial literacy that are relevant to the course, and teachers should be given the opportunity for free training.
This is important, because schools should reinforce the message that sound financial management is an essential life skill and stress the risk of debt – it is no different from teaching children about the dangers of smoking or drinking. And if they get different messages at home, well, then they have all the information needed to make an informed choice.