Bank accounts should become a rite of passage
FINANCIAL education should be made a compulsory part of every school’s curriculum – that was the motion Justin Tomlinson MP put forward in Parliament just before Christmas. Tomlinson pointed out that debit card usage now exceeds cash usage. Yet about 19 per cent of parents have never discussed how to spend money with their teenagers and 32 per cent have yet to discuss how to budget, or even describe what one is, while only 36 per cent of people understand that the term APR relates to payments.
No wonder that we are seeing a proliferation of payday loans whose interest rates are close to usurious and make the interest rate charged by a bank for unexpectedly being overdrawn look a bargain.
Regrettably, politicians shied away from demanding real change, preferring a tame motion asking merely for the government to consider the provision of financial education as part of the current curriculum review. Since the government had already said that it was actively considering introducing financial literacy as part of the PSHE (personal social health and education) curriculum, this was an opportunity lost.
The PSHE curriculum is almost universally derided by pupils and teachers alike. It is seen by many as a filler and isn’t taken seriously, partly because there is no examination. As a teacher giving evidence to the committee noted, “nothing concentrates the mind like an exam” and as a further witness also noted “noting concentrates a teacher’s mind like an exam”. Financial education is too important to be tagged on as an also-ran; it should be fully integrated into the maths syllabus and tested.
Furthermore, given its importance, we should help our children understand personal finance at a much earlier age, especially as frictionless electronic money transmission, whether through debit or near-field communication cards or by mobile phone messaging, will soon be the norm.
When a child enters their twelfth year of formal schooling – in Year 11, coming up to the age of 16 – Parliament should insist that each child is given, without charge, a bank account, at a bank of his or her choice.
The mechanics are simple. The bank account will arrive automatically, from central government, at the same time as the individual receives a national insurance number. The only form to be completed is one choosing at which bank the individual wishes to open the basic account, and to advise that before the first withdrawal he or she will need to have visited a branch to provide a single piece of identification and a specimen signature.
The bank’s anti-money laundering requirements can be vouched for by central government as they will have completed similar checks when issuing an individual’s national insurance number.
Therefore, with minimal bureaucratic hassle, each child starts better equipped for his or her financial journey. Children can learn how to pay for goods and services electronically, budget, save, and participate fully in a commercial society. No longer will financial literacy be an academic subject, it will be practical, personal and highly relevant.
Simon Culhane is chief executive of the Chartered Institute for Securities and Investment (CISI).