Monday, 15 August 2011

Financial Education - let us be clear

Since the late 1980s, compulsory education has witnessed a string of interventions intent on interpreting social and economic need as policy, often by idealists without classroom experience. Take the recent self-justification by David Starkey after a brief spell in Jamie’s Dream School. Despite actions that would have him disciplined in a professional setting, his celebrity qualifies him to hypothesize.

Herein lies the problem with Financial Education. Bereft of explicit learning outcomes, petitions to introduce it are no more than sound-bites to our debt incumbent woes. 

Asked to highlight the causes of over-indebtedness, advice agencies point unequivocally to unforeseen circumstances - redundancy, illness, relationship breakdown - whilst psychologists and behavioural economists can find no single demographic to pinpoint risk. Meanwhile the inclusion debate rages on the distinction between poverty and financial capability: it is hard to afford insurance when you can barely afford the rent.


At Zero-credit, our most recent research has identified government over-indebtedness and financial capability indicators to be fraught with difficulty. For instance, the notion that people borrow less as they grow older - referred to by economists as the life-cycle hypothesis - meets direct contradiction in the profile of clients entering advice agencies’ doors. Therefore, why focus on the young, unless a social marketing phenomenon akin to the anti-smoking lobby is our intent?


Moreover, the disqualification of consumers’ “subjective” sense of discomfort in favour of “objective” debt-service to income ratios, ensures repayment as king, irrespective of cost or consequence. Make no mistake, the availability of credit increases debt levels, and no amount of education will stop marketers from marketing new packaging, discounts and bundles. Are we to rewrite these into every Scheme of Work?


Should we give up? Only if in our desire to do something, we grasp at anything as the straw.

In entering the Financial Education debate, it is important to recognise that it is not so straightforward as a diagnosis of illiteracy or innumeracy. How can these be responsible for the near doubling of personal borrowing within a decade, when shameful as it is, illiteracy and innumeracy levels have been stable for 20 years? An absence of delayed gratification is our foe here, for in the desire to have now, pay later the very security of our streets has been at stake.


The higher order thinking skills required to make financial decisions can only ever provide part of the answer, for Financial Education is less a matter of teaching the functions of products and services than how to apply these, or indeed any other resource, to a range of different scenarios. Even if independent and critical thinking were achieved, there are countless examples of perfectly rational adults not sticking to these. Why else should we adopt auto-enrolment for pensions from 2012?

Make no bones about it. Financial Education is complex and demands far more of your attention than the glib satisfaction of those who stand to gain most from its teaching. Ask yourself, in all honesty, what do you need to learn before imposing an imprecise ideology on our youngsters.



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