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Personal finance education at schools will be “a major step forward” in dealing with society’s debt problems, the Financial Services Authority (FSA) in the UK has said.

Research from the Association of Investment Companies (AIC) among parents and teachers has revealed that nine out of ten parents and teachers (93% of both groups) think that personal finance education should be taught at school, and of these, half (50%) think it should be mandatory.

Currently, personal finance education is not compulsory and does not have to be included as part of the curriculum. Nearly half (45%) of parents think it is the joint responsibility of parents and teachers to educate their children on money matters.

Over half of parents (51%) believe that personal finance education is vital, because they believe they would be in a healthier financial situation now if they had been taught about money matters at school. The vast majority of parents (90%) had no financial education when they were at school, and two thirds (65%) of parents would now like some sort of personal finance training as an adult, either to pass onto their children, or to sort out their own financial affairs.

In the United States JumpStart Coalition, which promotes financial education for young people, has released some interesting evidence.

There has been an increase in numbers of students and high schools indicating that educators across the country are beginning to recognize the importance of financial literacy and the need for financial literacy education. However its last survey of high school students, conducted among 5775 12th graders in 37 states in 2006, found that those who had taken a financial literacy course actually did slightly worse on its financial literacy test than students who had not taken a course.

There are many possible explanations for the JumpStart survey result. Interestingly, JumpStart also found that kids from more affluent families did better on the test.

While financial education is good I think we need to examine the context of the education. The current approach is like teaching the classroom part of drivers education about 3 years before the student gets into the car and how effective is that?

Many people are calling for financial education as a remedy to growing levels of debt but is that like saying healthy eating classes will eliminate obesity?

Money, if properly managed, gives us freedom to pursue a fulfilling life; if not properly managed, it can destroy individuals and families. A topic of such importance is ironically not taught in any formal educational institute.

Emphasis on financial education may miss the obvious point that staying out of debt trouble doesn’t depend primarily on complicated book learning or at least not on book learning about finances.

An introduction to basic finance to young people can do more to build confidence rather than build intelligence. Rather than teach the math of finance perhaps an educational program for junior (middle) and senior (high) school students which focuses on the root cause of debt might be more relevant.

Being in debt is often caused by an addiction to spending, which is usually caused by underlying emotional turmoil. Without sorting out one, you cannot sort out the other. By teaching about the underlying triggers and emotional issues that cause people to get into trouble students can watch for those clues. After all, debt is the symptom, not the underlying cause.

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Steve

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