Why wait to get Financial Education to the people who need it

Over the last couple of weeks I have met with a couple of charities who help vulnerable people, these charities aim to help these people get back on their feet and give them a purpose and aim. Many of these people come from an environment where even the basics of budgeting are alien to them and we will be looking at how we can help them.

I have also made contact with charities and organisations that are already going out to schools to see whether there is a way we can work together. One comment to me was the difficulty of getting into schools and certainly this has has been a challenge, and one I am determined to overcome.

In the meantime I have started to put some thoughts together on what we would like to develop. What I would be really interested in, is not only people’s thoughts on what is here but also whether people are working in the Bristol and North Somerset area and would like to share their thoughts and see if there are ways we can work together. 

Introduction 

This blog outlines how we can help to provide financial education to primary schools, colleges and universities but also in helping vulnerable people who have not benefited from any form of financial education. The areas of education centre on three areas which are interdependent on each other, the area of most interest is investing because teaching about long term investing is crucial to changing a mind-set which focuses on short term fundamentals. But we understand that there are challenges within our education system which mean that without the basics we cannot get to the idea of talking about investing.

The aim of our program will focus on three areas:

1. Money Management
2.  Financial Planning
3. Behavioural Investing

We are aware that there are organisations offering this service, and that the Government are looking to change the National Curriculum to adopt financial education in schools. However, the changes proposed by the present government are not due to filter through until September 2014 (at the earliest). It could be that working with other organisations is a better route than developing our own programme and this is something we want to explore.

Consider:

1. 94% of people think that financial education for young people is important in the current environment
2. 69% of parents feel that their children will get into debt
3. 75% of parents do not feel that they can teach their children on money matters

And that society is changing, cash is being replaced with debit cards as the primary means of paying for items as well setting up regular payments through direct debits and standing orders. Managing finances can be a complex matter.

There is a need now:

1. To give guidance on handling money and making decisions about spending and saving money
2. To provide an understanding of the basic concepts of credit and debt
3. To ensure that young people are equipped to make informed financial decisions

Our program would be aimed at the target audience, starting at a basic level through to more complex discussions around investing.

Money Management Teaching

Primary School - Year 5 / 6 (Ages 9 – 11)

Basic understanding – themes budgeting, spending and saving   

•  Concept of budgeting – once you start earning (you earn money by working) you need to understand about budgeting, you should only spend what you have (there is difference between what you want and what you need) and you should understand that a credit card should only be used if it can be paid off each month
• Making choices (spending) - you must make choices about how to spend your money; you should shop around for the best deal, you should understand that if there is something you need but is not in the budget then choices have to be made
• Smart to save – you should come to understand that it is smart to save a percentage of what you earn; the earlier you save the more you’ll have in the long run. Putting your money in a bank account will protect it and earn interest (not much!)

Secondary School – Ages 11 – 13

Building blocks – themes summary of basics, ways of earning money, and setting goals

• Summary of basics – you should have a basic understanding of balancing incoming money and outgoings, you should have a basic understanding on making choices on how you spend money and you should come to understand that it is smart to save some of what you earn
• Career expectations – you should understand the basic concepts of earning money (i.e. job), as a teenager in school this may be helping parents, family, neighbours and friends but understanding what your choices are to earning money. You should understand that university is not your only option and university may build up long term debt, apprenticeships provide money and training so can provide career opportunities without debt (includes all types of roles including construction, accountancy, education etc)
• Financial planning (setting goals) – once you have understood the basics of budgeting, career expectations etc then you should start to understand the concept of financial planning. You should understand that financial planning is about the setting of goals, you have excess money each money and you want to use that to buy things you want, in simple terms there are three main goals:
• Short term savings – you should understand that short term savings are for those things you want to buy, could be a phone, camera, deposit for house etc
• Emergency cash – you should understand that emergency cash is needed for emergencies for example loss of job, illness etc (this is between 3 and 9 months of your living expenses), this emergency cash should not be used for non-emergencies (i.e. home improvements etc)
• Long-term investments – you should understand the importance of saving for the long-term. In most cases this will be planning for retirement, this may seem along time away but it is less painful at an early age

• You should understand that goal setting needs to be realistic, build each of these pots does not happen overnight, it is about setting measurable goals. It may be more important to build up emergency cash and then short term savings before you consider long-term investments. And finally you should understand the effect that each financial decision has on another. So for example, using debt to buy what you want may mean you can have it now but long-term it will be expensive.

 

Secondary School (14+), Colleges and Universities

Moving forward – themes summary of basics, and long-term investing  

• Summary of basics – you should have an understanding of balancing incoming money and outgoings, you should have an understanding on making choices on how you spend money and you should come to understand that it is smart to save some of what you earn. Effectively you should be at the stage of understanding how to set financial goals and make decisions
• Creating wealth – you should understand that creating wealth or savings is a long-term goal. You should understand what you are looking to achieve, and when you will want that money as this will determine the vehicle you use to save. You should have a basic understanding of what is available to you to invest in, for example an ISA, Pension, Shares etc. You don’t need to understand all the different types of options open to you but you should understand the basics
• Investing – once you have have understood the basics of saving you need to consider how you invest. So for example, an ISA is purely a vehicle, you need to choose where you invest the money within that vehicle – this will be a basic understanding of some of the main investment options i.e. shares, active funds, passive funds and investment trusts
• Investment thinking – once you have understood the basics of investment then you should understand the process of selecting your investment. You should understand that making decisions on last year’s performance is not necessarily the right approach; you should consider investing as a long term goal. You should understand the concept of value investing, and going against the grain 
•  DIY or advice – you should understand that you have choices, you can choose to make the investment yourself and how you do that, or you can seek advice from a financial planner. You should understand the costs of doing it yourself or seeking advice against the benefits of one over the other 

Post school investors

• Exploring the concept of successful investment – you should start to understand the challenges investors face, you should be able to spot the danger signs and you should understand that sustainable investing is not about chasing short term profit

Let me know what your thoughts are, and if you are involved with Financial Education in Bristol and North Somerset or have contacts I would love to hear from you. Please spread the word and keep this going.