In 2015 Red Star Education was established to address the wide-ranging and long term problems linked to low levels of financial literacy and comprehension. Realising that a lack of financial education has serious consequences on many levels, we developed a series of lessons designed to further learners’ understanding of effective personal financial management. During the course of this we have come across a multitude of organisations who also claim to teach financial education. Most high street banks now offer financial education in one form or another. NatWest, Barclays, Santander, HSBC and Lloyds banks all advertise their respective financial education initiatives. As do the Visa and American Express credit card companies. These companies have sections and resources on their websites dedicated to financial education. If you have noticed that there is a pattern emerging here, you are correct; all of these companies profit from debt.
The question is – are banks and credit card companies appropriate facilitators of responsible money management? As mentioned above, these companies have pages of their respective websites dedicated to financial education. All of these companies also have their brand names on display all over their financial education resources. Is this advertising appropriate in a financial education setting? Is it an attempt to promote the brand name, using the technique of inserting it over and over again into what should be purely educational resources? These resources are aimed at children between the ages of five and seventeen. Is the aim to educate, or is it to embed brand names in children of an early age ensuring they grow up with a familiarity with the banks or credit card lenders?
To be an educator in the truest sense of the word, the teacher must not have an agenda or a conflict of interest. To illustrate this point, we can use the hypothetical example of a cigarette manufacturer who then offers lessons on the risks of smoking cigarettes. Are these lessons going to be fair, fact based and impartial? Absolutely not. Why? Because the cigarette manufacturer has a vested interest in selling cigarettes and in keeping people smoking. The whole business is built around this. The banks and credit card companies are making huge profits from lending money and in doing so, placing and keeping people in debt. Can these companies really be expected to provide fair, balanced, impartial and fact based financial education lessons?
The teaching of financial literacy in the UK is sporadic at best. Since being added to the National School Curriculum in 2014, very few schools have followed through and taught the subject effectively. There are a number of reasons that have contributed to this; a lack of investment in the training of teachers to properly facilitate the subject, no OFSTED regulation of the subject which means the subject does not stand alone and does not have a final exam, overworked teachers who do not have the time or inclination to take on the teaching of a brand-new subject, and the fact that there is no country-wide strategy for the teaching of financial literacy. This is despite the fact that most teachers, professional observers and Government think tanks are all in agreement that increased levels of financial literacy would massively benefit individuals, the population as a whole, and would boost the UK economy.
When challenged on levels of financial literacy in the UK, the Government uses the banks and credit card companies as examples that the problem is being addressed. This is because it appears on the surface that the banks and credit companies are addressing the problem. But in reality, are they addressing the problem or are they adding to it? Let’s go back to the cigarette manufacturer example mentioned earlier; if the Government required an independent organisation to raise awareness of the dangers of smoking, would they commission a cigarette manufacturer to teach the subject to young people?
In 2015 we learned that Wonga, the infamous and predatory payday loans company, was attempting to teach financial literacy. Did Wonga attempt to explain its typical rate of 1509% APR rate on one of its short-term loans? Did they demonstrate how much the borrower must pay back, and over how long? Did they illustrate clearly the dangers of taking out such a loan, and the consequences if the repayments are not kept up? Or was it a cynical ploy to give their company a better public image with the bonus of advertising the Wonga brand to a young crowd?
Allowing Wonga to teach the subject of responsible personal finance is the clearest example of the cigarette manufacturer prophesising about the effects of smoking. This is the problem with the state of financial education in the UK right now. It’s clear that a new financial literacy strategy is needed – a new strategy that actively embraces and promotes financial education, ensuring it is not seen as an added on optional subject. Financial literacy teaching cannot be limited to banking and lending companies who pay only lip service to the subject by dedicating a page or two of their websites to the subject. Financial literacy should be facilitated from a purely educational standpoint, using qualified tutors and scholars, and not banking or payday loan company advocates. Financial brand names of any kind should not be included in any educational literature, and the responsibility of teaching financial literacy cannot be left in the hands of the banks, credit card companies or worse still, predatory loan companies. The old approach is not working: it is time for a new, impartial approach to financial education.