The Global Approach to Financial Education

The Global Approach to Financial Education

Several countries, as follows, most of whom are members of the Organization for Economic Co-operation and Development (OECD), have developed and implemented national strategies on financial literacy.

Australia: In 2005, the government established the Financial Literacy Foundation (FLF) to implement a national literacy strategy. The creation of FLF was a key recommendation put forth a year earlier by the country's Consumer and Financial Literacy Task Force.

The FLF worked to integrate financial literacy into the educational system; to develop resources and support for teachers; and to provide financial literacy materials for the workplace.

In July of 2008, all of FLF's functions were transferred to the Australian Securities and Investments Commission, in order to consolidate the Australian government's financial literacy response under the Commission and to strengthen its role in safeguarding Australia's economic reputation and well-being.
Ireland: In 2007, the country's Financial Regulator embarked on a major study to assess the financial capability of Irish consumers. Largely based on the U.K. Financial Services Authority's survey, the face-to-face Irish survey took place between October 2007 and January 2008.
Although they were still in the early stages of their work, the regulator issued a Preliminary Report on Financial Capability in Ireland in June 2008. The final report has not yet been published. The broad objective of this work is to establish a baseline measure for financial capability, against which future research in this area can be compared.

Concurrently, under the supervision of their National Steering Group on Financial Education, Ireland has developed a Financial Competency Framework.

The Netherlands: Under the working title CentiQ, wijzer in geldzaken (Sensible with Money), around 40 partners from the financial sector, the government, information and consumer organizations and science, signed an agreement, in 2006, to work together on financial education. Together, the partners will carry out a strategic agenda that includes programs and projects aimed at improving the financial knowledge and skills of consumer and stimulating an active attitude, so that consumers can make conscious financial choices and become financially competent.

In 2007 and 2008, CentiQ carried out a number of studies and inventories in order to form a basis for the strategic agenda and the CentiQ Action Plan. All CentiQ programs are based on several strategic starting points, including:
•Household finances – These form the basis for all of the programs.

•Prevention is better than correction.

•The program is based on easily accessible and practical resources.

New Zealand: A Crown agency, the Retirement Commission, led the development of New Zealand's National Strategy for Financial Literacy, in 2008. The agency has also undertaken comprehensive "financial knowledge surveys", with the most recent being completed in 2009.
The New Zealand Retirement Commission also created Sorted (http://www.sorted.org.nz/), an independent government-funded organization dedicated to helping New Zealanders manage their personal finances, throughout their lives. In 2009 the Ministry of Education also took over all responsibilities for financial education in schools.

Singapore: The national financial education program, MoneySENSE, was launched in October 2003 to bring together industry and public sector initiatives in financial education, to create a long-term, sustainable program to enhance the basic financial literacy of Singaporeans.

The first National Financial Literacy Survey was conducted in March 2005. The survey found that, in general, Singaporeans have fairly healthy attitudes towards basic money management, financial planning and investment matters. Through its national MoneySENSE program, the Government of Singapore continues to support initiatives that enhance the basic financial literacy of consumers.

The United Kingdom: The Financial Services Authority adopted a National Strategy for Financial Capability in 2003. This strategy included a long-term, complex plan to target young people through new curricula, and savings accounts, to provide generic advice to the population at large, and to create new public programs for retirement savings.
Under the awareness portion of its National Strategy, the Authority has reached 8.4 million people, as of November 2009.

The United States: In 2006, the Financial Literacy and Education Commission created "Taking Ownership of the Future: The National Strategy for Financial Literacy". In addition to the 26 "calls to action" it published in its 2006 Strategy, the following year the Commission developed six new calls to action, where it wishes to concentrate its efforts.
In 2008, the President's Advisory Council on Financial Literacy was formed. In December 2009, the Departments of Treasury and Education outlined the first step in their efforts to promote financial capability among the nation's youth. Based on the findings of a new national financial capability survey, the National Financial Capability Challenge (http://www.challenge.treas.gov/) was created. This is a national award program, which aims to encourage financial education in schools across the country and recognize high-performing teachers, students and schools.

The OECD: In 2005, this 30-member group of countries published the first major international study on financial literacy.47 The study defined financial education, outlined the benefits of increased financial literacy and identified a life cycle of key decisions. In 2008, the OECD launched the International Gateway for Financial Education, which serves as the first global clearinghouse on financial education. It seeks to raise awareness; ensure a wide dissemination of research, best practices and guidelines; and build a worldwide network of government stakeholders on financial education.

Key Links

Australia

http://www.understandingmoney.gov.au/

Ireland

http://www.financialcapability.ie/

The Netherlands

http://www.wijzeringeldzaken.nl/

New Zealand

http://www.financialliteracy.org.nz/

Singapore*

http://www.moneysense.gov.sg/

The United Kingdom

http://www.fsa.gov.uk/financial_capability/

The United States

http://mymoney.gov/

The OECD

http://www.oecd.org/

From Leveraging Excellence: Charting a course of action to strengthen financial literacy in Canada

Conservatives would make financial education compulsory in UK schools

In a recent News of The World interview, Shadow Chancellor, George Osborne was asked:

LABOUR wants financial education to be compulsory in schools from 2011. Do you?


VERY much so. Not enough people realise how important it is to save, to understand the details of credit card statements, to be able to compare different APRs and the like. You also have to improve numeracy skills, and have a population that's comfortable with numbers.

Personal Financial Education compulsory in the UK from 2011

As a nation, we've educated our youth into debt but never about debt.
By Martin Lewis

Yet that's all going to change, it's been announced that from September 2011 personal finance education will be a compulsory part of schools' curriculum.

It can't come too soon. Student loans have hit the grand old age of 20, yet it's taken that time for politicians to realise government-enforced borrowing must be coupled with government–enforced financial education.
Even so, being money–savvy needs more than just a classroom, so as I’ll explain later, there are three vital Teen Cash Class lessons to teach your kids.

It's about breaking the UK's debt habit
The modern UK has a nasty debt habit. While many of the grandparent generation follow the 'neither a borrower nor lender be' mantra, some of today's parents are debt–bingers relying on plastic as a crutch to fuel unsustainable lifestyles.
We're left with an unnatural juxtaposition; borrowing has lost its stigma. After all, we need it to buy houses or get educated yet we're a debt–illiterate nation.

And while we need to accept that debt's fire used correctly is a powerful enabler, too many still get burnt. So the challenge is what and how we teach our children to stop passing on bad messages and break the cycle of debt.

It mustn't become an exercise in bank branding

For too long, the only financial educators in some schools have been banks, with their 'school bank of Natwest' and the like – a sceptic would say this is touting for trade, disguised as generosity.

It was once calculated people are more likely to get divorced than change bank account. So if banks bribe 10-year-olds to join with a cheap plastic toy, they may still have them as customers half a century – and thousands of pounds in profit – later.

Not every bank aim is Machiavellian, but if we’re going to invite banks into schools, let's ask ten in to compete for business and show pupils how to assess their offers. This may just help teach that a bank's prime job is to sell us products, not help.

Check out the sweeties by the till

To start wee ones off correctly, they need to be told the modern world is all about competition and marketing. For that, there's nowhere better than those cathedrals of consumerism we call supermarkets.

When there with under eights, ask them: "Why do you think there are sweeties by the till?" And when those cherubic faces look up, explain that it's because a supermarket's job is to make money, so they put the sweeties there so you won't forget to ask mummy or daddy for them. That way, they might make a little bit more money.

What's in the new curriculum?

Financial education will become a compulsory part of what's known as Personal, Health and Social Education (PHSE) – a life class that also includes sex, drugs, hygiene and health education taught to all primary and secondary pupils.

Personally, I'd also love to see an intensive couple of weeks taught to 16–year–olds after they've finished GCSEs and before end-of-term – the perfect moment to prepare them for the real world (see the Government's plans for the curriculum).

Yet the core concern is what'll be taught; much of the exact curriculum is still being developed, although certainly in early years it'll start with the basics covering how notes and coins work – and in senior school feature interest and credit cards.

But bank accounts and how income tax works isn't enough; we need to set them up as effective empowered consumers.

It's about training us to buy better.

Companies spend billions of pounds a year on marketing, advertising and teaching their staff to sell, so this is a wonderful opportunity for schools to engage in what I call buyer's training.
That can pay real dividends – a couple of years ago, in an experiment filmed for ITV1's Tonight programme, I was parachuted into a school to see what I could teach a dozen 15–year–olds in a 'Teen Cash Class'.

The results were astonishing. After just one day, the kids went home and saved their parents a combined £6,000. That leads to two obvious conclusions: first, there's a need for financial education in schools; and second, there's a need for financial education of adults too. Afterall, if their children can save them so much, not everything's right.

The class worked so well, I was asked to convert the lesson plans into a free guide which I'm pleased to say has now been downloaded by teens, parents and teachers nearly half a million times.

Thankfully, there is room to include this type of teaching in the curriculum. I know, as I was recently asked in by Children’s Secretary Ed Balls to discuss what's being taught.

He'll now be incorporating the Teen Cash Class philosophy into elements of the teaching – and it's already underway with the help of finance education group Pfeg.

And putting my money where my mouth is, I've volunteered to go and start to talk to teachers to encourage them on the subject. During the original cash class, I found the teachers I met in staffrooms were bursting with even more questions.

As a clarion call, it's worth remembering this has taken years to come to the table. No matter who forms the next government, it's crucial nothing derails it. Perhaps, had we started teaching about money a couple of decades earlier, our recession would not have been nearly as deep.
The Teen Cash Class (also see the Teen Cash Class guide)

Lesson 1: A company's job is to make money.

There's nothing more important than understanding companies aren't there to help, give advice or be your friend; they're there to make money.
It doesn't make them bad, it's just something that needs to be understood. So when you see sexy adverts or marketing trying to target your spending impulses, remember someone's spent serious cash targeting your desires to loosen your pockets – even when it isn't necessarily the right thing to do.

That's the reason Dragons' Den isn't called Fluffy Bunnies' Den: their job is'’t to help, it's about profit.

So don't let them get one up on you – every time you buy something, step back and ask: "Do I need it, will I use it, have I checked if it's available cheaper elsewhere?" If not, keep the cash in your pockets.

Lesson 2: Debt isn't bad, bad debt is bad

Grandparents can be very dangerous. If they tell you never to borrow, don't listen! If you want to buy a house or go to university, the system is designed so you’ll need to borrow, unless you've super–rich parents.
What's crucial isn't whether you borrow. but how. Massive differences between different types of debt mean getting it wrong can cost £1,000s. And that's the problem with the 'don’t ever borrow, little Johnny' attitude because if it's all bad and you need debt, you mightn't focus on the right type.
Many students leave university with well over £10,000 of borrowing. Each year, when I'm interviewed about the new student debt figures, I answer: "It's not how much, but how much of each type that counts."

•Good debt. Official student loans are the cheapest long–term debt you’ll ever get (currently 0%) and only need repaying if you earn over £15,000. You pay 9% of anything earned above that, so the more you earn, the more you repay.

•OK debt. Banks try and buy your custom with interest–free student overdrafts. Yet if you're still in debt when you graduate, the rate shoots up to 18%. Use this for short–term cash shortages if necessary, but not long–term borrowing.

•Bad debt. Get a credit card, loan or hire purchase as a student and it's a nightmare. High rates mean you'll owe more and more. When you're a student, it's tough to repay. In a nutshell, avoid.

Far too many students who've been told "don’t borrow!" find they end up with the worst debts, as they don't delineate between different types.
Lesson 3: Loyalty doesn't pay

While it's an important quality with friends, family, girlfriends and boyfriends; when it comes to dealing with mobile phone companies, brands, insurers, banks, shops and more, loyalty is for losers.

Most of the best deals are for new customers. If you look around, they need to fight to win your business which tends to mean more money in your pocket.

For example, car insurers kick and spit to win new business, tempting people in with ultra–hot deals. Yet when it comes to renewal, your price goes up as you're paying for the newbies' discounts. Shockingly, if you apply to your existing company as a new customer with identical details, you'll usually be charged much less.

Financial Education in Schools

Adapted from an Australian Government report investigating Financial Literacy among women.

Financial literacy programmes in schools: This approach to improving financial literacy is advocated in Australia and internationally, by government and the business sector, because it reaches a large part of the population and is a means to teach basic concepts to young people before they face financial crises or have to make major financial decisions.


There is ongoing discussion about where in the curriculum financial studies ought to be incorporated: mathematics and personal development are two favoured learning areas. Also under discussion are questions of when financial education should start and what should be included (ASIC 2001). While discussions continue, government initiatives have begun in Australia, the USA, Canada and the UK.

Financial education in schools has the potential to allow young people the opportunities listed by the UK Financial Services Authority (1999):

•to develop numeracy, literacy and IT skills in the context of personal finance;

•to develop an understanding of the nature and use of money in its various forms, including credit and debt;

•to learn how to access, interpret, question and evaluate financial information and advice;

•to learn about the consequences of financial decisions and about consumer rights and responsibilities; and

•to learn how to weigh up risks and benefits in order to choose appropriate solutions to particular financial needs.

Such a suite of skills, they believe would equip young people to deal with financial situations as they arise.

One of the main limitations of financial education in schools is that students may have a limited interest in learning about things that have little immediate relevance to their lives. While they may be keen to learn about buying a car, they are unlikely to be interested in superannuation. Further, as the range of financial services and products continues to grow, it is not feasible for schools to provide comprehensive financial education.

The effectiveness of financial education in schools is also affected by limitations on time available and teachers expertise.

Interesting Article from The Scotsman

A MONTH after Scotland was nursing its collective Hogmanay hangover, many people will now be nursing a fresh headache as their credit card bills land on the doormat.


According to statistics from insolvency trade body R3, almost four million people in the UK indebted themselves to pay for Christmas and approximately 6.5 million do not have enough money to pay for the subsequent credit card bills.
 
The core issue here is the awful example adults give their children when they rack up so much debt. Kids look to adults as role models in many areas. Why should their attitudes towards personal finance, debt and consumerism be any different to our own?
 
Read the full article here

7 Quick Tips for Teaching Children About Money

Here is a video we have put together which suggests 7 Quick Tips to help teach children about money. We hope you enjoy it

Dreams Can Come True - Chapter 1 Video

To celebrate the imminent launch of the first book in The Financial Fairy Tales series -
"Dreams Can Come True" we have prepared a special sneak peak video of chapter 1.

To view the video on YouTube or to share the link please click here

Enjoy

Financial Education - who's responsibility?

The current financial crisis has sharpened the focus on the need for better financial education across all segments of the population. Just as information and guidance on healthy eating and exercise can prevent a lifetime of obesity, effective financial education, when started at an early age, can prevent chronic financial health problems later in life.

Where this education should take place is a matter of debate. Whether education and guidance of this sort would be more effectively shared by parents and families or taught formally as part of the school curriculum. Here we discuss some of the issues on both sides.

Schools

Financial literacy is an important element of preparing young people for adult life, which in turn is one of the main purposes of the education system. Lessons in money and financial matters can be integrated into many other existing subjects, such as mathematics, citizenship, PSHE and with some imagination into art, design and manufacturing based subjects.

Teachers have the skills of explanation, motivation and effective delivery. They also have access to resources, books and technology. Banks and other financial providers have programmes available to support teachers and schools.

Teaching financial literacy in schools guarantees a uniform, minimum of knowledge. Admittedly the quality and effectiveness may vary from school to school, region to region, yet a basic level of delivery can be assured.

Children are in a learning environment at school and therefore may be more receptive. Some parents may lack the necessary time, expertise or interest to teach their children about money. This may perpetuate a downward spiral, where a lack of awareness is passed from generation to generation.

Parents

At present few teachers have the necessary experience or knowledge to competently teach financial education. Consequently they may possibly pass on their own beliefs or bad habits concerning their own finances. The training and resourcing required to up skill teachers will take time and money.

School curricula are already crowded with mandatory content. New criteria can only be added at the expense of something else.

Regardless of where you are reading this, is the state in the best position to impose a financial education curriculum? Is the example of huge debt and continually spending more than your income a great example to follow? So too, many of the banks whose financial attitudes have heightened the current economic problems.

The financial world exists outside of the classroom and many would argue that so too lie the better opportunities for learning. Examples include taking children shopping, encouraging them to save and take part time jobs. Showing by example how to budget, pay bills and make financial decisions are far more real when experienced in context.

We should also consider the differing religious and moral beliefs of parents and communities. For some, the principle of tithing or giving 10% to church or charity is fundamental and may conflict with a school curriculum. Other families and traditions have very strong views on debt or use cooperative systems for providing within communities.

These are some of the main arguments in the financial education debate. A definite solution is not immediately clear, however what is evident is the need for some kind of change. Parents and in fact young people themselves can access a range of financial information from a whole host of providers. They need not wait for others to take the lead. Schools on the other hand should be encouraged to provide at least a minimum explanation of key information as a safety net for those unable to access the information for themselves.

The Financial Fairy Tales - Chapter 1 available FREE download

The Financial Fairy Tales are a series of books to help young children learn about money, finance and prosperity principles.
The first book - Dreams Can Come True will be available at the end of January.
A free download of the first chapter is available from the site at www.thefinancialfairytales.com

Dreams Can Come True

The Financial Fairy Tales - Dreams Can Come True

Announcing the first in a series of Financial Fairy Tales aimed at children between 5 and 11.

With the aim of making learning about money serious fun - these stories educate as well as entertain and provide the foundations for sound money management later in life.

Taking an approach of making learning a fun and engaging process, the stories introduce financial concepts such as saving & borrowing, self employment and trading for profit.

Dreams Can Come True will be available from Authorhouse at the end of January 2010

Why isn't Financial Education Taught in Schools

If ever there was a time for better financial education then surely it is now? When you look at the state of many of the economies around the world it’s a mystery why financial education is not compulsory schools. It is easy to blame banks, big business or governments for the current climate but it is the education of individuals that need to change.

With the State of Virginia recently announcing that they will make a one year financial education course compulsory, this article looks at some of the arguments for and against mandatory financial education.

At school, we may have learned some skills necessary to get a job, but nobody tells us how to create or manage our wealth. If we cannot educate ourselves on ways to obtain and retain our money, we are headed for a future financial disaster.

In the USA, individual debt is growing 23 times faster than the economy. It is a similar situation in many other developed nations, for example the credit card debt in the UK is over £220bn or an average of £3175 per person. Thousands of college graduates who have invested in their education are facing a student loan crisis. The job market is shrinking, and the sour economy is preventing employers, parents and relatives from helping those who are behind on payments," USA Today reports. "Student loan defaults are at their highest rate since 1998, and likely will go higher” People are even losing their homes and have no money to retire on. It is estimated that the average person today will require $ 1.5 million by 65 years of age to retire comfortably.

Some argue that a better way to teach children about money is in the home, which may have its merits but may create something of a vicious circle: when parents are financially illiterate — they’re not likely to teach their kids very well, are they? Which means that the minority of people, who are smart about money, will (potentially), raise kids who are also smart, while for the rest the cycle will continue.

Another argument put forward against financial education in schools, centres on the twin pillars of lack of time and lack of money. School curricula are already crowded places and a significant financial education programme would have to come at the expense of something already in place. Few teachers would have the necessary competence and confidence to deliver such programmes without the need for additional training and resourcing.

These arguments may be countered by providing financial education online or via other media accessible to students, and indeed their parents, 24/7. Young people will spend hours studying independently for subjects with a real personal interest, playing an instrument, making a MySpace page or learning to drive for example.
Funding may not be such an easy nut to crack but there are existing projects sponsored by banks and financial institutions around the world. Dissenting voices would point out however that if it was the banks that got us into this mess are they the best influence to help educate the next generation? Governments may also see the longer term benefits of providing financial education as saving them the money they may otherwise have to spend on social security in the future.

In conclusion it would appear that there is a growing tide of public opinion supporting the need for better financial education, which in my opinion should at least begin in schools. The debate will continue as to who should deliver what and when but in the meantime, parents and young people themselves can take a proactive approach and seek the resources currently available.

A great source for younger children is The Financial Fairy Tales series, which introduce money principles and awareness via entertaining and engaging stories.

Financial Education – a Global Perspective

Continuing social, economic and political change over the last five years has meant that the need for financial capability in young people is even more pressing. In many western counties issues surrounding increasing levels of personal debt, crashing markets and their effect on pensions mean that there is a greater need for individuals to take a more active and informed interest in their own financial future.

This article looks at various initiatives for teaching children about money around the world.

In South Africa, Teach Children to Save (TCTS) is a one-day initiative designed to spotlight the importance of teaching the country's youth about saving money. The objectives of the project include:
To raise awareness about the benefits of savings, financial planning and foster a culture of saving. To demonstrate the important role that the financial services sector can play in creating a financially literate nation. To initiate a national program that encourages a collaborative, industry-wide effort to increase financial literacy.

Teach Children to Save South Africa (TCTS SA) was launched during July Savings Month on the 25th July 2008. On this day, volunteer bankers and financial professionals became teachers for a day and delivered a one hour savings lesson to learners in grades 4 to 7. This pilot initiative laid the groundwork for an annual event that spotlights the important role that financial service providers can play in educating the nation's youth about saving. While modelled on the U.S. program, TCTS SA was customized to align with South African culture, financial education needs and the school curriculum especially Economic Management Science.

Scotland was the first part of the UK to publish guidance for schools in this area, back in 1999 Learning and Teaching Scotland, published Financial Education in Scottish Schools – A Statement of Position. This document describes managing money is “one of the most important and challenging features of everyday living” while outlining a minimum entitlement within the school curriculum. Their aims are for young people to understand key financial and economic ideas; be skilled in managing their financial affairs; recognise the importance of using financial resources responsibly and be able to operate in a confident and enterprising manner.

The Scottish programme as part of the 3-18 Curriculum for Excellence is under-pinned by the expectation that every teacher is a teacher of Numeracy, Literacy and Health and Well-being. A thematic / topic framework is suggested which schools may adapt to their particular needs. The four main elements of Financial Education in Scotland include: Financial Understanding, Financial Competence, Financial Responsibility and Financial Enterprise

An Australian report, ‘Financial Literacy - Australians Understanding Money’, found that young people are particularly interested in learning more about issues such as budgeting, saving, managing debt and avoiding financial scams.
Australian schools have introduced a nationally agreed Framework that provides an integrated cross- curriculum approach for all students from Kindergarten to Year 10.
Consumer and financial literacy will be integrated in programs across English, Mathematics, Science, Humanities - (Business, Commerce, Economics, Technology and Enterprise) Civics and Citizenship and ICT. This will allow all Australian students in their compulsory years of schooling to develop knowledge and understanding, skills and values in consumer and financial literacy.

An example of a Chinese approach to financial education is a theatre program for children aged between 8 and 12 years old in the cities of Beijing, Shanghai, Guangzhou and Shenzhen.

The program is based on a comic book, entitled "Agent Penny and Will Power in Operation Finance". Scenes are based on stories of daily life and present students with commonly-used financial tools and concepts, including budgeting and compound interest, as well as the formation of healthy financial habits.
According to schedules of the program, the Cheeky Monkey Theatre, presenting itself as the world's first ‘Chinglish’ Theatre Company, will visit between 40 and 50 schools in Beijing, Shanghai, Guangzhou and Shenzhen over the next ten months, and this play is expected to be seen by around 20,000 children.

In summary, financial literacy is regarded in many countries as a key life skill. The financial world is characterised by a wide range of choices and often high complexity, and as consumers we all need to take advantage of this dynamic environment. Young people are being targeted as consumers at an increasingly early age and may face complex financial choices. As 18 year olds, they are likely to have access to credit and loans in a way that would have been unheard of 20 years ago. Providing young people with good financial literacy skills helps to establish responsible attitudes and good habits from an early age. It helps foster an attitude to managing money that can enhance their long-term financial security and lifestyle.