Is the UK Financially Illiterate?

  • May 22 2018
  • John P

With most of the UK in some form of debt, is there a problem with our financial education?

Financial education is an essential part of a child’s development to ensure that they understand the value of money and the importance of staying on top of personal finances. However, with the UK’s debt levels rising year on year, are we doing enough to ensure a future of savvy spenders?

The UK’s Financial Literacy Landscape

Financial literacy has once again become a huge talking point in the UK, with millennials and those following them being labelled ‘generation debt’.

While there are services in place to help people better understand how to manage their money, a culture of financing and contract leasing has left many in a position where they’re unlikely to ever be totally debt-free.

  • 50% of the UK population is considered ‘financially vulnerable’.
  • 25 to 34-year-olds are more likely to be in debt.
  • More than 6 million Britons don’t believe they will ever be debt free.
  • Over 4 million people in the UK are thought to be in serious financial difficulty.
  • The average person in the UK owes £8,000 (on top of any mortgage debt).

A Solution Through Education?

In 2014, lessons on personal finance were introduced as part of the school curriculum in the UK. However, there is still some debate on how much or little we should be teaching and the best ways in which to do it.

These are the key points that are currently being covered in UK schools according to the All Parliamentary Group on Financial Education & the Curriculum:

Key Stage 1

  • Recognise and know the value of different denominations of coins and notes.
  • Find different combinations of coins that equal the same amounts of money.
  • Solve simple addition and subtraction of money of the same unit, including giving change.

Key Stage 2 

  • Add and subtract amounts of money to give change, using both pounds and pence in practical contexts
  • Solve simple money problems involving fractions and decimals to two decimal places
  • Estimate, compare and calculate different measures, including money in pounds and pence
  • Solve problems involving finance measurement using decimal notation and scaling

Key Stage 3

  • Use standard units of mass, length, time, money and other measures
  • Solve problems involving percentage change
  • Use compound units such as speed, unit pricing and density to solve problems

Key Stage 4

  • Work out VAT with the aid of a calculator
  • Compare different offers for loans and savings
  • Show understanding of planning and managing finances
  • Work out the new income following a percentage change (e.g. NI)
  • Use percentages when comparing investments

This all sounds well and good, with a lot of emphasis put on the practical applications of students’ knowledge, but what do the people teaching it think?

The fact that over half of teachers believe that enough isn’t being done to secure the financial future of the UK’s children is troubling and the effects can be seen in the current state of household debt.

The Consequences of Poor Financial Literacy

Debt management charity StepChange which recently reported that in the first six months of 2017, 64% of people who sought advice were aged under 40.

A study by financial education experts Young Money from the same year titled ‘The Ticking Time Bomb of Generation Debt’ found that the three main causes of rising debt in younger people were:

Another factor is the increase in student debt caused by rising tuition fees leaving many young people in debt before they even enter the work force…

Students from the poorest backgrounds, who need more support from loans, will graduate with debts of over £57,000.
Interest charges begin as soon as courses start meaning students, on average, will have accrued £5,800 in interest charges by the time they have graduated.
Then there’s our increasing reliance on credit cards which are increasingly being pushed on younger consumers to ‘improve their credit rating’…

These financial problems, which are starting at a younger age for reasons described above, are having a severe knock-on effect later in life.

How Parents Can Teach Children Financial Responsibility

With confidence in the UK’s financial literacy hitting an all-time low, teachers not convinced by the curriculum and the growing issues of debt in younger generations perhaps it’s time to pay more attention to the old credo – ‘education begins at home’.

83% of UK parents believe it is their responsibility to teach their children about money, yet almost 1 in 6 say they don’t feel confident about it.

Here is some advice that can be applied to everyday scenarios to help children learn more about the value of money at each stage of their development.

For more insights into the financial landscape of the UK, visit the Credit Angel blog.