The pensions system is collapsing, house prices are stratospheric but may crash and banks are pushing almost unlimited credit at everyone in sight. Just surviving in this climate requires a lot of financial nous. But, says, Wendy van den Hende, most of us start adult life unprepared to cope.
“It's still possible for a pupil to go through the whole of school life without receiving any personal finance education at all,” says van den Hende, chief executive of Pfeg (www.pfeg.org), the personal finance educational charity. “It's a very small part of the curriculum.”
Van den Hende, who took on her job 4½ years ago, believes that navigating the personal finance maze is becoming more complicated, and that the next generation will face much greater financial challenges than the current one.
“There's a lot going on which underpins the need for what we do,” she says. “Eighteen-year-olds have huge financial decisions to make; students have to budget, negotiate debt with their parents and banks, decide whether to take a job, buy food.”
She adds: “Their leisure needs are more expensive and their expectations of leisure much higher.”
Pfeg, established in 2000, is pioneering the teaching of personal finance issues in schools, but there is clearly a long way to go.
“Teachers often don't have a good level of knowledge on personal finance, and are not comfortable with it,” van den Hende says, although she believes Pfeg has already been able to make great strides.
“We have raised the profile of personal finance education and have had a major impact on bringing it to people's attention.”
Personal finance is now in the core curriculum as part of the personal, social and health education (PSHE) and citizenship options. Pupils can even get qualifications in personal finance; a certificate at A/S level and a diploma at A-level have been developed by the Institute for Financial Services.
“But if you don't start until the sixth form it's too late,” says van den Hende. “You need to be building up the knowledge and vocabulary from much younger.”
She believes there is no lack of agreement about the need to encourage personal finance teaching to young people. Pfeg is now part-financed by the Financial Services Authority, which sees the charity as a way to fulfil its statutory requirement for consumer education. Pfeg grew out of a lobbying group financed by industry bodies such as the Association of British Insurers, the Investment Management Association and the Association of Inv-estment Trust Companies (AITC). Up to half of Pfeg's annual £500,000-£1m budget is provided by the FSA, and the remainder by the financial services industry.
Apart from an ever-growing need for more resources, van den Hende says the biggest problem is teachers themselves. “No teacher is a specialist in this area; the nearest is a maths teacher,” she says. “Personal finance can be done through different subjects, but it's not the first thing that teachers will think about.”
Pfeg's first large project to address this problem was a £1.9m Excellence and Access scheme with 300 secondary schools in England, funded by the AITC, Prudential, HSBC and Barclays.
The project worked with schools from a range of different socio-economic and cultural backgrounds, and included ones in rural as well as urban areas, comprehensive and specialist schools, teenage mother and pupil referral units.
“It seemed to me that what was wrong was that this was not an area that teachers were comfortable with and we would need to do something dramatic,” van den Hende says. “We wanted to try to create a significant mass of schools whose experience could then be replicated across different schools.”
The project trained teachers and helped them develop individual “school plans” to integrate personal finance into the syllabus at different ages. The most common choice was to include it at key stage 3 or 4, generally within PSHE lessons, but also as part of maths teaching.
Pfeg's training uses a flexible model which can be adapted to the requirements of different schools. It focuses on changing attitudes and developing skills, often by using case studies.
The focus is to try to create real-life situations involving personal finance. “Pupils need to do things to experience it,” says Alastair Mathews, who provided training to teachers during the Excellence and Access project. “They find it boring to be taught about the banking system.”
To counter the boredom, Pfeg tries to come up with subjects that pupils can relate to.
“We got pupils in a group working on mobile phone tariffs,” says Mathews. “They had to decide which mobile phone to get. This helped train children to compare sophisticated product offers.”
Mobile phones grab youngsters' fancy, but getting them tothink about the big financial challenges they will face ismuch harder. “The hardest thing is getting them to look at retirement and pensions,” says Mathews.
One method Pfeg uses is to get pupils and teachers thinking about different cultural experiences of money.
For example, it uses a Barclays-sponsored case study about a Jamaican-British family planning to go on a Caribbean holiday, in which the family concludes that the way for them to save will be to use a “pardner”, an African Caribbean concept brought to the UK in the 1950s.
Pardner is practised amongst groups of friends and family members who agree to save a predetermined amount. The money is given to an organiser, usually female, and each week a member is given the entire weekly takings.
Pardner is just one case study Pfeg has developed which addresses the fact that pupils' financial knowledge and habits will depend on their cultural backgrounds. In another, an Asian widow discusses whether she needs to save in a pension, considering that she expects her family to look after her in her old age.
In another, a newly-wed Muslim couple arrange to buy a house by receiving interest free loans “qarde hassan” from their mosque and family members.
This kind of co-operative approach is extremely useful, both as a means of resolving some of the problems of individuals and as a way of getting people interested in the subject of handling money. Van den Hende is clear, though, about the only long-term solution: making sure that children leave school with a proper personal finance education.