Delivered to the (virtual) Financial Education Forum hosted by the Bank of England on Tuesday 23 February 2021
I’m delighted to be able to speak to you all at the Financial Education Forum, thank you for this opportunity.
I feel passionately about the importance of a good quality and effective financial education at school, and by that I mean starting right from primary level. I’m proud to be Chair of the widely supported All Party Parliamentary Group on Financial Education for Young People. We benefit from a significant amount of support from a large number of MPs, as well as a wide range of MPs from a variety of different political party backgrounds.
There is much that remains to be done, as you know well, to ensure that all young people across the country have the opportunity to develop the skills, knowledge and confidence in money matters - and to navigate key financial decisions in their lives. At the moment provision in schools is patchy and inconsistent. A lack of financial education directly affects young people’s life outcomes, their wellbeing, mental health and their performance in the workplace. Financial education is of course also crucial for social mobility – it is key to overcoming challenges faced by individuals as well as a country, helping to boost productivity.
The research is in itself very clear about the positive impact that financial education can have on individuals’ lives, on life chances and also for the UK economy, and it is increasingly crucial. Tragically the COVID pandemic has demonstrated more now than ever how important financial education is, at times when money issues have become so much more stressful for many households, whether because of furlough or the fact that 18-24 year olds are the most likely to lose their jobs in the pandemic. The impact on mental health is of course considerable as household circumstances change, as Martin knows full well with his work with the Money and Mental Health Policy Institute.
Policy and Parliament obviously play a key role in ensuring that quality financial education in schools is a reality and that young people leave the education system financially capable. The right framework will help ensure that schools and teachers have the top quality resources that they need in the classroom, as well as the space in the school day. Policy also helps ensure that teachers receive adequate training at the start of their careers and ongoing training throughout their professional careers – ensuring that teachers feel confident about how to talk about money matters with their students. Parliament and Whitehall have levers to influence other bodies who are crucial to the financial education landscape too, like Local Authorities and Ofsted to name just a couple. There are a number of different agencies need to be aligned in order to make a difference to young people’s financial futures.
Highlighting the need to improve financial education, is the fact that the personal finance landscape is changing at an ever-increasing pace. For example, since the start of the COVID pandemic in the UK, there has been an explosion in young people using buy-now, pay-later lending. In fact five million people have started using them since the start of the pandemic in 2020. Young people are moving away from products such as credit cards and towards new products such as Klarna. These products are clearly debt products, as Martin has pointed out, and they are marketed aggressively at younger people via social media. Very recently the ‘Woolard Review’ from the Financial Conduct Authority stated that there should be regulation "as a matter of urgency" as there was "significant potential for consumer harm". It’s really important for us to note, however, that in addition to regulation, it’s essential to ensure that we arm students with the tools to get to grips with their finances – we need an adequate financial capability framework so that the adult consumers of the future have an understanding of the implications for them of new products, and of the raft of other innovative products that no doubt will be targeted at them in the vibrant consumer finance market.
The APPG has, as I mentioned, already produced an Inquiry report pointing to the need to improve financial education in secondary schools. Martin generously donated funds to allow Young Money to write and distribute the first ever financial education textbook, sending 100 free copies to the 3,400 state-funded secondary schools in England. And I’m really excited to hear that Martin and the Money and Pensions Service have teamed up recently to fund textbooks to be drafted and distributed to the devolved nations - to students in Scotland, Northern Ireland and Wales.
These copies will distributed free to state-funded secondary schools there later this year, once schools reopen. The digital version of the Northern Ireland has already been made available there, with hard copies to be sent out once schools reopen. Scotland will get their own digital copy in March, with physical copies in April and Wales will get their copies in English and Welsh in September. This is a really important development for students and teachers in the devolved nations.
We all agree that prevention not merely cure is essential. This is a critical time for financial education and we need to ensure all young people benefit from financial education from the start of their educational journey at primary school. We clearly have fantastic support for financial education from a broad spectrum of organisations, with Martin Lewis campaigning hard as ever, to the Bank of England our hosts for today and with support from Minister John Glen at the Treasury and Minister Nick Gibb at the Department for Education, as well as support from the financial services sector and research bodies and all of you who have joined this virtual meeting. We need to galvanise our joint forces to work towards making sure that we have good quality and age-appropriate financial education as part of primary school provision. We need to intervene from the very start, when children’s money habits are formed from age 7 and before that.
Both of our recent APPG Inquiries have recommended statutory financial education at primary school level. I also personally spoke to five young people who’d recently left the care system as part of our inquiry into financial education for care leavers. They told me that they hadn’t been at all prepared for their financial futures. In fact, care leavers are often provided with accommodation but with no practical support in terms of how to connect themselves to good value contracts for basic utilities. That’s just not good enough. These young people are one of the most vulnerable groups in our society. One of the care leavers told me that he’d been in a care home and ‘it was very much luck how they raise you in financial matters’. We’re setting young people up to fail if we don’t provide them with the basics of financial management.
The ability to manage your money is absolutely fundamental in life and to upwards social mobility. I do know that I’m probably preaching to the converted with the Financial Education Forum, and I’d like to encourage you all to work with me to raise the profile of financial education in Parliament, across Whitehall and in the media – focusing on the importance of financial education from primary age. This key recommendation will make a big difference to ensuring that that every young person leaves school with the knowledge, confidence and skills to manage their money well.
Thank you for your attention.