Governments throughout the world are waking up to the benefits of teaching financial know-how to children at an early age in school.
Budgets aren't child's play
As children, we learn many of life's building blocks in the classroom. Squirming at our desks, we're given the knowledge, facts and skills that can help us to succeed. Two plus two is four. Christopher Columbus's three ships were called the Nina, the Pinta and the Santa Maria. And in 1687, Sir Isaac Newton hypothesised that what goes up, must come down. But did you learn how to create a budget and stick to it? What is the difference between good and bad debt? Or why it is important to pay your credit-card bill on time?
Like it or not, how to deal with money is a major challenge we inevitably face in our lives. Financial institutions and the exchange of money for goods and services are essential backbones in any modern society. So why not teach basic money management in schools? According to recent report from the Task Force on Financial Literacy, a government initiative in Canada, most citizens admit that they lack the proper skills, knowledge and confidence when it comes to their finances. In fact, the respondents of the nationwide report, involving 175 local organisations, 14 communities and more than 300 written submissions, expressed one clear message: financial education in the home isn't enough.
Classes on money management should become a permanent fixture of the school curriculum, the report found, slotted somewhere between mathematics and lunch. L. Jacques Menard, the vice-chairman of the task force (www.financialliteracyincanada.com), says most Canadians cited dark clouds from the economic downturn as a reason to search for clearer solutions to financial literacy. "Some provinces have begun integrating literacy into the school curriculum," he says.
"Many of those helping and serving vulnerable groups also provide financial literacy education, along with a wide range of educators at various levels, credit counsellors, financial advisers and others." Established in 2009 by Jim Flaherty, the Canadian minister of finance, the task force's first mandate was to produce the report called What We Heard: A Summary of Public Consultations. The next step, Mr Menard says, will be a thorough review of the reseach to help form recommendations to the government, which could subsequently lead to mandatory financial education in public schools.
"Canadians stressed that they need tools to assist them with budgeting, saving and debt repayment," Mr Menard adds. "That they need simple and clear financial documents from both the private and public sectors, and that they are concerned about financial fraud." While many of the specifics have yet to be established, participants in the report called for mandatory courses in primary and high schools. Pupils who may not fully understand basic issues concerning debt can still draw upon examples in their everyday life to gain a better appreciation for money.
"Many, if not most, young Canadians have to deal with issues surrounding cell phones and contracts, for example," he says. "This could be the first of a long series of important financial decisions for which they should be prepared." Older Canadians, he adds, need help with issues concerning retirement and dealing with the financial consequences of a longer life and general shift away from pension plans and defined models. This call by Canadians is just one voice amid a global chorus of discussion concerning how to effectively teach children about money.
In Russia, the New Economic School and the Citi Foundation recently announced a joint development that would result in an innovative multimedia project on personal finance management. The US$300,000 (Dh1.1 million) grant by Citi is meant to kick-start a financial literacy campaign in co-operation with the noted graduate school of economics in Moscow. Intended for both school children and adults, the programme will touch on topics such as deposits, loans and financial planning.
Much of the Western world, including the UK, Australia and the US, is also taking steps for children to receive greater financial education. The Personal Finance Education Group (PFEG), an independent UK charity that helps schools to teach the fundamentals to students, works directly with the government "with the aim of influencing education policy". According to PFEG (www.pfeg.org), 90 per cent of British teenagers say they worry about money on a regular basis, 54 per cent are interested in learning about saving and 66 per cent say lessons about money would have helped them deal with today's financial challenges.
Wendy van de Hende, the chief executive of PFEG, believes instruction from parents is simply not enough. "At school, you have a captive audience and you can ensure that proper learning takes place and link financial education to a range of other activities, lessons and learning," she says. "Families have an enormous influence on their children and can do a great deal to develop their children's financial capability.
"However, the information is not always accurate, family behaviour around money can lead young people into unhelpful ways and parents do not always know enough about the subject." A child from a poor family, she adds, might pick up important values in budgeting, but perhaps lack skills in issues such as insurance and investments. On the flip side, wealthier families often fail to teach children the true value of money.
Ms van de Hende says the organisation links with 54 per cent of primary and 88 per cent of secondary schools in England. More than 3,800 secondary schools have received help from PFEG. Ms van de Hende points out, however, that financial education in the UK remains "patchy", and schools are under no obligation to teach pupils about money management. While these global initiatives may represent a welcome change, Ms van de Hende says that, like any other subject in school, the real key will be the quality of education.
"It would be nice if it were compulsory, as it can be a bit of a lottery whether someone will receive financial education - many young people do not," she says. "However, compulsion by iself is not enough. It needs to be taught and assessed to high education standards."