Scotland has been ahead of the curve when it comes to financial education.Indeed, personal finances have been a topic in classrooms north of the Border for a number of years, long before it was introduced into the national curriculum in England. While this is something we should be proud of, we also shouldn’t rest on our laurels.
With younger generations facing an increasingly uncertain financial future, we need to be asking whether we are doing enough to prepare our children to manage their finances in adulthood.
Aside from receiving pocket money, school will often be a child’s introduction to the concept of managing money and finances. These lessons progress from basic money management skills such as calculating change, all the way to more complex skills like budgeting or cost comparisons as the student develops.
Including financial education into the curriculum has had proven results. According to research by The Financial Capability Strategy for the UK, children and young people who have learnt about finance are more likely to save regularly, have a bank account, and be more confident when managing their money.
Yet despite growing financial awareness among students, younger generations are still not saving enough for the long term. In fact, research from the Office for National Statistics into wealth accumulation in the UK found that half of all 20-29-year-olds have no retirement savings at all. Faced with rising student debt, decreasing home ownership and limited wage growth, the odds already seem stacked against the younger generation when it comes to their long-term finances.
However, the reason behind this isn’t because they aren’t being prudent with their money. In fact, they are. According to the Intergenerational Commission, people in the UK aged 25 to 34 are actually spending less relative to 55-64-year-olds than at any time since the 1960s.
The problem lies in the fact that many young people aren’t confident in how much they should be putting away for the future, or how they should be saving it. Indeed, according to pension provider Aegon, one third of people globally do not know if they are on course to achieve their desired retirement income.
Millennials have been found to be particularly in the dark; Ipsos Mori asked Britons to estimate how much someone would need to save into their private pension pot to get an annual income of £25,000 in retirement. While the majority of those surveyed underestimated the sum required, millennials’ guesses fell way wide of the mark at £90,000.
Retirement can seem a long way off when you’re in your 20s and 30s. But this is precisely the time when you should be looking to bolster your retirement pot. If we don’t talk to our young people about the importance of saving and investing for the long term, we risk a whole generation facing a shortfall at retirement.
One way to improve our own financial education system is to learn from other countries who have had proven results when tackling this issue. For example, Canada scores highly for financial literacy, according to the Organisation for Economic Co-operation and Development. Of the participating Canadian provinces in the Programme for International Student
Assessment study, students performed better in financial literacy than those around the world who performed similarly well in mathematics and reading. The Canadian government made improving financial literacy a priority in 2015 and announced the National Strategy for Financial Literacy — Count Me In, Canada.
This involved working with public, private and not-for-profit organisations across the country to empower people financially. At a school level in Canada, financial literacy is part of the curriculum in many different subjects – such as maths, social studies and business studies – to ensure a holistic view of money. This way students don’t just learn specific skills such as budgeting, but also how to think critically, problem solve and improve decision-making too.
It’s clear that we have some way to go to equip our young people for their financial future and this needs to be made a priority. With financial education programmes already an established part of the curriculum, Scotland is well-placed to take things further: making the principles of money-management a core plank of school life as a whole – not just relegated to a single lesson.