Banking StandardsWritten evidence from the Personal Finance Education Group (pfeg)

Summary

1. It is always important, but in the current economic climate pfeg believes strongly that financial capability is crucial if future generations of adults are to make the right financial decisions for themselves, their families and the national economy. Prevention is better than cure. Financial education is a fundamental building block for life. pfeg believes that by educating children and young people to understand and manage their finances, we can build a generation of empowered consumers able to deal with financial challenges such as student debt, unemployment, pregnancy, negative housing equity and loss of income due to ill-health. A summary of our submission is as follows:

The banking industry has a crucial role to play in creating financially capable children and young people

Children and young people are currently active in the marketplace and need guidance to prevent them becoming irresponsible consumers as adults, the banking sector has a significant role to play in helping ensure that education

Following the key recommendations listed in Financial Education and the Curriculum1 financial education should be in the national curriculum and should be taught in every school through maths (financial literacy), and PSHE (financial capability)

The financial services levy should contribute to financial education in schools as many subscribers anticipate.

The Money Advice Service should have responsibility for coordinating the contribution that the banking industry makes to financial education in schools by:

(i)Offering national leadership on a financial capability strategy which is internationally credible; advising the Department for Education on curriculum content, delivery, initial teacher training and continuing professional development

(ii)Providing UK wide guidance, oversight and coordination of financial education programmes and resources administered by the banking industry aimed at children and young people in schools

(iii)Providing grants and financial support to those organisations working directly to embed financial education in schools

pfeg believe there is an opportunity for the fines imposed on banking institutions to be put to good use to prevent the current situation from occurring again. We would ask that consideration is put towards a using a small percentage of the fines to pay for financial education in schools, and that this would be administered by the Department for Education.

Introduction

2. pfeg (Personal Finance Education Group) welcomes the opportunity to submit evidence to the Banking Standards Commission.

3. pfeg is an independent charity helping teachers plan and teach personal finance relevant to students’ lives and needs. Our mission is to ensure that all 4–19 year olds can have financial education—giving them the skills, knowledge and confidence in money matters to thrive in our society.

4. pfeg provides free support, resources and expert consultancy to make learning about money easy. We know that each school or college is unique, and we provide a bespoke service which is accessed through our free advice line, website and face-to face sessions. We have worked with 151 local authorities, reaching 54% of primary and 88% of secondary schools in England.

5. pfeg also works with government, opinion formers and key bodies, campaigning for consistent, quality financial education for children and young people across the UK. We provide the secretariat for the All-Party Parliamentary Group on Financial Education for Young People. There are 250 cross-party members making it the largest active APPG.

6. pfeg is not affiliated to any one organisation and does not market or sell any financial products or services.

Response

7. Two- thirds of people in the UK feel too confused to make the right choices about their money and more than a third say they don’t have the right skills to properly manage their cash.2

8. UK’s outstanding personal debt stood at £1.548 trillion at the end of March 2012. pfeg knows that children and young people are contributing to this. pfeg believes strongly that if we are to enable future generations to manage their finances well all young people from 4—19 years must have access to high quality financial education in school. This education will ensure they can make informed choices and take responsibility for their own actions. Prevention is better than cure, being cheaper, effective and potentially less damaging. pfeg feels that the financial services industry has a crucial role to play and would like to see that role given greater priority across the sector.

9. Children and young people are making financial decisions themselves at a very early age. A Populus3 survey conducted for pfeg showed that one in five children has used their parents’ or older siblings’ credit or debit card to purchase items online; for those children who have purchased items online, 10 is the average age they begin doing so; and the average age at which children first have their own mobile phone is eight. Without education, these activities make children and young people extremely vulnerable.

10. EdComs Research4 also shows that as children get older, bad habits can start to show; over 75% of 7 to 11 year olds are saving their money but by the time they get to 17 over half of them are in debt to family and friends and over 26% see a credit card or overdraft as a way of extending their spending power. A YouGov survey in 2008 found 70% of 18–24 year olds were in debt5.

11. Young people don’t only get into debt, they worry about money. Nine in ten 14–18 year olds say they worry about money on a daily basis6. pfeg is concerned that financial worries will become an even bigger problem in the future. In 2009 the FSA made a significant correlation between anxiety or depression and a lack of financial capability7.

12. The UK is currently faced with high youth unemployment figures at 22.2%8. Research prior to the recession showed that 51% of teenagers would like to learn how to control their spending. In 2011, 90% of teenagers said they thought learning about money was important9.

13. The banking industry in the UK has a fundamental role to play in encouraging healthy financial habits from an early age, promoting a move away from the current ‘culture of debt’ and educating consumers about trusted providers of financial help and support when problems arise.

14. Many of the UKs leading high street banks now have financial education programmes that they take in to schools. pfeg welcomes their contribution and works alongside many of these providers to ensure that children and young people are receiving high quality, nonbiased education.

15. The All Party Parliamentary Group on Financial Education for Young People’s report entitled Financial Education and the Curriculum stated that ‘Outside organisations have the potential to boost the teaching of personal finance education in schools. However, schemes must be quality checked and it is clear that there is no capacity for it to be delivered universally by providers. A Quality Mark would ensure that teaching resources are linked into the current curriculum and that organisations do not market financial products or services.’10

16. pfeg’s own Quality Mark scheme, which currently kite-marks the majority of financial education resources for use in schools produced by high street banks was seen as best practice within the sphere. The programme could be developed to ensure that volunteers going in to schools from the banking sector were trained and assessed to ensure the highest quality education reaching young people.

17. In June 2012 the Money Advice Service announced it was to launch a voluntary Code of Practice for those providing financial education programmes and resources to young people. The research behind the Code of Practice highlights that there are currently no suitable and agreed Key Performance Indicators within evaluations of these programmes. KPIs are needed to ensure that these programmes result in the sustained behaviour change that the MAS have highlighted within their research. pfeg welcomed this announcement from the MAS and continue to work in collaboration with the MAS to develop honed behaviour change recommendations.11

18. pfeg would like to reiterate that whilst resources and volunteers from the banking sector play an important role in supporting the teaching of financial education it is essential that it is led by teachers and supported by a comprehensive and progressive curriculum. pfeg has responded to both the current National Curriculum and the Personal, Social, Health and Economic education (PSHEe) reviews recommending that financial education is a statutory element within both the mathematics and PSHEe programmes of study.

19. pfeg believe that the most sustainable way of ensuring the largest cohort of young people receive the financial education they need is to ensure that teachers have the knowledge and confidence they require to teach the topic. As the financial climate is constantly shifting their knowledge would need to be maintained by regular CPD.

20. pfeg has established what we believe to be a comprehensive delivery ambition to ensure that financial education is taught in every school in the UK.12 There will obviously be some cost in recognising this ambition. pfeg has had many discussions with industry representatives whose organisations contribute to the financial services levy. They have reported to us that they are surprised to find that their funds are not being used for educating those under the age of 16. Regardless of how appropriate the model is the funds are not being used in the way that some of the subscribers anticipated.

30 January 2013

1 Report by the All Party Parliamentary Group on Financial Education for Young People. December 2012 http://www.pfeg.org/sites/default/files/Doc_downloads/APPG/Financial%20Education%20%26%20the%20curriculum%20-%20Final%20report%20-%20APPG%20on%20fin%20ed%20for%20YP%20-%20Dec%2011.pdf

2 APPG on Financial Education for Young People, Financial Education and the Curriculum December 2011. p.4.

3 Populus, Feb 2009

4 EdComs Research, January 2007

5 Ryanair services “Why do young people pay more?”, 2008

6 EdComs, January 2007

7 Financial Capability and Wellbeing, Evidence from the BHPS 2009

8 17 to 24 year olds FEdS Consultancy Briefing April 2012

9 RBS Group MoneySense research May 2012: 50,000 12-19 year olds

10 APPG on Financial Education for Young People, Financial Education and the Curriculum December 2011. p.28.

11 The Money Advice Service, June 2012 https://www.moneyadviceservice.org.uk/en/static/service-develops-financial-education-code-of-practice

12 http://www.pfeg.org/about-us/our-delivery-ambition

Prepared 24th June 2013