Recent reports in the UK have shown that there is a great deal of financial illiteracy which hampers people from making informed decisions regarding their finances. The suggestion has been raised that adults must take a financial literacy test before qualifying for a loan, to ensure they understand the basics of what they sign for. With such a background many are completely unable to advise their own children about finances and thus they emerge into young adulthood as unequipped to deal with finances as their parents.
To counteract this The Debt Advice Foundation, a UK charity that advises and helps those in debt, has developed an education initiative aimed at school children and young adults. The initiative aims to educate children so they “leave school with the skills and confidence to manage their money well.” It has often been argued that teachers are not necessarily skilled enough to teach finance but the initiative provides them with the books and tools they need to teach the subject.
A series of books have been produced by the charity, in conjunction with the Southlands School in Chorley. The books known as ‘The Money Diaries’ are not yet mandatory in UK schools, although many have started to use them. They may well become part of the national curriculum as the government recognizes that education in finance is necessary. The books and guides which accompany them have received the attention of the Governor of the Bank of England who said “I am very impressed by the ‘Debt Diaries’…they are an excellent initiative and I would be happy to support the scheme.”
‘The Money Diaries’ cover many key areas of finance which often flummox the young who are unprepared to handle their finances. Areas covered include the difference between want and need, peer pressure, banks, savings accounts and interest, living expenses and budgeting, ways to save money, debt and the consequences, credit cards, and the difference between good and bad debt.
Other educational financial tools can be found on the website of the Debt Advice Foundation with material which can be downloaded. There is a financial glossary aimed at the young, and a document which teaches the ABC of borrowing: affordability, benefits and consequences. This explains the consequences of borrowing if circumstances change and debt repayments are not met.
One of the important things about the initiative is that ‘The Money Diaries’ are enjoyed by the pupils who use them. They have become popular as the messages and lessons they impart are presented in readable stories which appeal to the young.
Financial literacy skills for the young are often simply ignored if the parents do not have the financial know how to pass on, so hats off to The Debt Advice Foundation for recognizing the need and coming up with an initiative to tackle the problem of mishandling of finances through education.