With my role as a money analyst here at MSE and my previous experience working in a bank, I like to think I know a thing or two about the financial world.
However, for many people, growing up involves being thrust into the financial world without knowing the basics of managing money – it’s something many haven’t been properly taught about from early on.
So last month I went back to school for a day to teach an A-Level class some basics about money.
Armed with my Teen Cash Class presentation, I began my talk with a simple question: "Who here has a bank account?"
Most of the students put their hands up. Brilliant.
Next question: "What do you know about your bank?" There were a few responses, but most didn’t know anything.
So I went on to explain how banks make money, the concept of earning interest and the types of products banks sell to customers.
I stressed the benefits of having a bank account, such as earning interest and other rewards and, perhaps most importantly, how it can help you to get a mortgage in the future. But at the same time, I explained that they need to be cautious of some products they may be offered, such as credit cards.
So then we discussed whether credit cards were good or bad. The general consensus among the students was that they are a bad thing, and in a way they were correct. If used incorrectly, credit cards can be toxic. However, use them correctly and the rewards can be great (see our Cashback Credit Cards, Avios Points and Credit Card Stoozing guides for more on this).
It was also important that students understood that credit cards don’t give free money, and if they do ever get one they must always pay it off in full each month. Now I know I can’t do Martin’s "IN FULL" shout as well as he does, but I made sure they heard the message very clearly.
Is there such a thing as good debt?
Next I went on to talk about whether there is such a thing as good debt. The idea surprised most of the students, as they never thought debt could be linked with good. But mortgages and student loans are, of course, a form of debt, and are these necessarily bad, I asked the students? It got them thinking.
Unless you’re extremely lucky and have the money upfront to buy a house, most people will need to borrow in the form of a mortgage to buy one. And actually most students would be better off taking a student loan and saving their money for a house deposit rather than paying for university upfront (read our Beware paying uni fees upfront guide to see why).
Take our Good Debt/ Bad Debt Quiz to test your knowledge.
Financial education is so important
Spending time with these students made it clear how important financial education is in schools. At the end of the session the students were brimming with knowledge and were ready to embark on their adult life armed with the basic, yet often neglected, financial knowledge.
But not all students will receive this help. Since September, financial education has been incorporated into citizenship classes only for 11- to 16 year-olds in all maintained schools in England, and there are also stronger links to it in maths for all ages. This is something which MoneySavingExpert.com had called for over many years.
However, this only applies to schools that follow the national curriculum, so disappointingly many will still miss out.
If you’re a teacher and want to talk to your students about money, or a parent who wants to teach their child, there are a host of free resources on the MSE site to help you – see Teen Cash Class and our Financial Education section for downloadable activities and guides.
Do you think more needs to be done to help kids understand finance? Please let us know your opinions in the discussion below or in the forum.