This week has seen the return to school for the majority of the UK’s 8.5M+ schoolchildren. I’m not sure about other people, but memories of school for me conjure a potent mix of nostalgia and horror – the idea of repeating my secondary school years via some kind of Bill and Ted time travel shenanigan’s is not an attractive one. My school years included no mobile phones, no social media and come to think of it, not much in the way of internet either. I imagine things have changed significantly in both the syllabus and how its delivered - with the exception of financial knowledge.
I left secondary school armed only with the ‘knowledge’ that pensions and mortgages were something old people worked towards.
It appears that little may have changed in education in nearly 20 years as my day job attests – there is generally universal confusion around some of the basic building blocks of personal financial planning and how economics can affect the day-to-day decisions we make.
Witness the unfortunate soul, who (as covered in a Guardian article back in March 2013) was so desperate for short-term cash, that he took out a £80 loan from a company called Capital Finance One (not to be confused with credit card giant Capital One). He signed-up to pay back £111.20 after 10 days plus various late payment fees – on an annualised basis a mind blowing 16,734,509.4%. Yep, that is over 16 million percent. A quick google search shows the firm has since changed its name to CFO Lending and is now in administration after the FCA forced it to pay £34 million in redress to more than 97,000 customers. A fitting end and a good example of when the Regulator properly performs its duties but it begs the question - how were potentially 97,000 people not put off by eight figure interest rates?
This is not something that can be fixed with pamphlets, or Government backed advertising campaigns. What is needed is a wholesale change in the culture of how we discuss, engage with and approach financial matters. The starting point has to be schools and the change has to be cultural.
Back in the early 1950’s a group of scientists arrived on the southern Japanese island of Koshimato to study a group of Macaque Monkeys.
This particular troop of Macaques were fed sweet potatoes on the beach by the scientists in their attempt to observe and analyse how they interacted as a group. One day, a young female called Imo was seen throwing her potatoes into the shallows of the sea before fishing them out and then eating them. What Imo had discovered was that tossing her food into the water, cleaned off the dusty sand clinging to it. Previously the older monkeys had simply persevered with hand brushing the potatoes before eating the presumably slightly gritty food. Remarkably Imo’s relatives observed her eating ritual and started to copy her – eventually resulting in her immediate family partaking in the eating of non-gritty and slightly salted sweet potato.
Over the following years the scientists observed this behavior spreading throughout the Macaque troupe on Koshimato, until washing potatoes became ubiquitous. This habit was passed down the generations and to this day the descendants of Imo wash their sweet potatoes before eating, even though now they are provided on a sand free platform and do not need cleaning.
Imo was the catalyst for a cultural change and from the simple beginnings of devising a better way to eat her sweet potatoes, managed to change the entire cultural habits of not only her peers but generations who followed.
Back to the year 2018 and the issue of financial education in schools. Whilst I hastily sidestep the apparent comparison of UK School children with small furry simians, it is clear that from a cultural shift perspective, we need an Imo (apparently the Japanese word for potato), or group of Imos of our own to spark a much-needed change in people’s understanding and willingness to grapple with financial matters. Whilst hoping for some kind of “genius monkey” is unlikely to be efficacious – I’m sure Steve Webb, Ross Altman and Esther McVey would probably shy from such a title – some excellent work is being undertaken in championing this cause.
Another important area where change is being implemented, is currently driven by the Personal Finance Society (PFS). They have introduced what they call an Education Champion pro bono programme. The idea is for Financial Planners to engage with local secondary schools and FE colleges to introduce the financial basics to young adults and give guidance on the types of things they should be thinking about as they enter the workforce.
The PFS have devised an interactive board game that can be played by up to 30 children of secondary education level in teams of up to six each. The basic idea is for the students to access a fictional individuals’ attitude to risk and apportion their income across four areas of allocation; pension; investment; savings; and protection. Points are given for correct answers, but the real aim is to get students to think analytically about how soft facts and aspirations can be translated into real world financial decisions. It is also a great way for my profession to introduce itself to potential new recruits – new blood being something of increasing value in the financial planning sector
As an early adapter of the Education Champion scheme and having recently connected with a local school to take part in the initiative, I believe that this type of programme can have far-reaching positive effects not just on those individuals who take part, but on the society they enter armed with the proper tools to elevate their standing in the wider financial world. “If…”, as Einstein said “… you always do what you always did, you will always get what you always got.” Sometimes, to effect that change, we just need a little LIFT.