The Importance of Financial Education: A Transformative Approach
Integrating financial education into Citizenship and recognising its vital role in shaping a more equitable financial future for young people.
The Importance of Financial Education: A Transformative Approach
ACT’s contribution at the Houses of Commons on the 30th of January marked a significant step forward in recognising the critical intersection between financial education and Citizenship. Liz Moorse, Chief Executive of ACT, delivered an impactful testimony before the Education Select Committee, urging the integration of comprehensive financial education within the broader Citizenship curriculum.
How can we understand financial education?
Financial education encompasses the acquisition of knowledge and skills necessary to navigate the complexities of personal finance, budgeting, investment, public spending priorities, taxation and economic systems. It serves as a compass to guide individuals through an evolving landscape of digital currencies and financial tools and is linked to broader understanding of how the economy functions. Decisions made by those in government, locally and nationally affect our daily lives and reflect different perspectives on how to prioritise public resources and resolve the political problems of the day.
Amid a transformative shift from a traditional cash economy to the prevalence of online money systems, the definition of financial education takes on a critical significance for young people. In this era, financial education is not only theoretical: it’s a practical imperative for young people to understand how to manage their finances in an increasingly digitised world. Empowering them with the ability to make informed financial decisions not only ensures personal financial well-being but also equips them to critically engage with the broader economic structures shaping their lives.
As the dynamics of money undergo rapid transformations, the relevance of financial education lies not just in adapting to these changes but in fostering a generation capable of shaping a more equitable and sustainable financial future.
Financial education not only ensures personal financial well-being but also equips them to critically engage with the broader economic structures shaping their lives.
Why do young people need financial education?
Against the backdrop of an evolving financial landscape, research conducted by organisations like Citizens Advice illustrates the pressing need for comprehensive financial education. These studies showcase the soaring debt levels and financial challenges faced by young people, amplifying the urgency for educational reforms that would include a structured national financial literacy programme.
Citizens Advice studies reveal that 15-24 year olds carry unsecured average debts of £12,215, the highest among any age group. Particularly alarming is the staggering 206% increase in the debt of this age group since 2012. This trend, coupled with the 70% debt to income ratio of young people aged 15-24, underscores the imperative of early intervention financial literacy.
Moreover, a 2021 Citizens Advice report indicates that 45% of young British people have utilised Buy Now Pay Later (BNPL) services, with half doing so without full understanding of the terms and a third eventually regretting their decision. 4 in 10 have struggled to repay, further emphasising the critical need for consistent financial education.
A 2014 study conducted by the Centre for Social Justice Change considered the interaction between students and predatory lending practices. They found that students are regularly accumulating debts on credit cards and bank loans, with one third running up arrears on debt repayments. Notably, a majority of students who took out short-term high-interest loans reported that as a result of their indebtedness they have experienced heightened anxiety and difficulty in concentrating on their studies.
The relevance of financial education in addressing these challenges cannot be overstated. The research data underscores the financial vulnerabilities of young individuals, emphasizing the urgent need for comprehensive education programs.
In a broader societal context, these financial challenges can have long-term consequences, affecting individuals’ mental well-being, academic performance, and overall quality of life. It’s not merely about acquiring financial knowledge but preparing individuals to make informed and responsible financial decisions, setting the stage for a more secure and prosperous future.
What are ACT’s research findings?
ACT’s findings from an ongoing study with a diverse group of schools, brings attention to the positive influence of specialist Citizenship teachers in fostering a successful programme of teaching. These findings align with ACT’s imperatives for financial and economic education, emphasising the need for specialist educators capable of navigating financial literacy topics and developing the conceptual connections between economy, politics and society.
Concurrently, challenges identified, such as the lack of a consistent teaching team, a designated subject leader, and a comprehensive Citizenship curriculum, directly correlate with ACT’s recommendations for enhancing financial education. Addressing these structural deficiencies becomes imperative to effectively implement ACT’s strategies for comprehensive and impactful financial literacy programs in schools.
The National Citizenship Education Study (NCES) further reveals disparities in teaching frequency, with economic and financial education receiving varying levels of attention. The findings underscore the value of statutory requirements, and GCSE Citizenship Studies playing a pivotal role in enhancing the profile and importance of financial education in schools.
Education for effective Citizenship is vital if we are to collectively tackle the challenges we face in society and to create a more inclusive democracy. Topics such as financial and economic education, alongside core knowledge of political system, parliamentary democracy and justice, highlight the relevance of the subject today.
Citizenship aims to prepare pupils to take their place in society as responsible citizens – part of this responsibility includes capabilities in managing money and make sound financial decisions. By being equipped with critical thinking and debate skills, young people will be empowered to make reasoned financial decisions, plan for future needs, and interrogate financial products and services properly.
Financial education in Citizenship ensures young people's personal financial well-being but also equips them to critically engage with the broader economic structures shaping their lives.
The Link to the Education Select Committee’s Inquiry:
The Education Select Committee’s inquiry aligns seamlessly with the issues highlighted in ACT’s recommendations. The pressing questions of what should be taught, where financial education should sit in the National Curriculum, and how to support teachers and schools were at the forefront of yesterday’s discussions. Liz’s testimony positioned Citizenship education as a central pillar in addressing these questions whilst also advocating for an ambitious and collaborative cross-subject approach to supporting educators in delivering effective financial education.
The research findings on the financial challenges faced by young individuals directly resonate with the Committee’s inquiry, providing a substantive backdrop for ACT’s advocacy. The inquiry serves as a platform to translate research insights into actionable policies that can empower young people with the essential financial literacy skills needed to navigate an increasingly complex financial landscape.
The Role of Citizenship in Providing Financial Education:
Central to Liz’s message is the need for clarity in teaching expectations and consistent support for Citizenship education. Her testimony underscored the importance of elevating the status of Citizenship education in schools to empower teachers to provide comprehensive financial education. Liz presented a vision where financial education is intricately woven into the fabric of Citizenship, fostering a holistic approach to preparing young individuals for responsible and informed civic participation.
The Citizenship teaching requirements advanced by ACT integrate financial education at various educational stages. At key stages 1 and 2, students learn about money’s sources, uses, and the importance of saving. Progressing to key stages 3 and 4, the curriculum expands to more advanced financial topics, including budgeting, risk management, credit, debt, insurance, and public finance. GCSE Citizenship Studies extends this focus, incorporating discussions financial and economic themes including public taxes, budgeting practices, and debates around government priorities and provision of public services.
At the inquiry, Liz addressed concerns about the Ofsted annual report, noting the contradictions in the report created by inspecting Citizenship under a Personal Development framework, ultimately hindering the delivery of quality financial education. This insight brings attention to the need for a comprehensive and coherent evaluation of Citizenship education, including financial education, to ensure its effectiveness in schools.
Financial education can be intricately woven into the fabric of Citizenship, fostering a holistic approach to preparing young individuals for responsible and informed civic participation.
Next Steps: Advocating for Change:
The crucial link between Citizenship education and financial literacy has been made evident by ACT’s research and Liz’s testimony, advancing a call for a paradigm shift in how we approach financial education for the next generation.
Liz’s contribution to the inquiry drew attention to ACT’s initiatives, raising awareness, providing accessible resources, and delivering quality CPD to teaching practitioners. The testimony was a call to action for a fundamental shift in how society approaches financial education. It was an articulation of a vision where financial literacy is not a supplementary skill but an integral part of civic education, equipping young individuals with the tools to navigate financial challenges and contribute meaningfully to society.
In conclusion, ACT’s contribution to the Education Select Committee signifies a turning point in recognising the indispensable role of Citizenship education in fostering financial literacy among young individuals. It has become clear that the subject is crucial to bridge the gap in financial education to forge a future where financial literacy is an integral and empowering for every student along their educational journey.
