How – and why – ten-year-olds are being taught to run a business
There’s an excited buzz in the Year 6 class of Yeading Junior School, in outer London. The ten-year-olds recently set up a polytunnel in the school grounds, and now they’re deciding which vegetables to plant in the new polythene greenhouse. Their teacher, Mrs Taylor, is cheerful but firm: ‘When the vegetables are grown, we’ll sell them for profit. Let’s work out how much we should charge for different vegetables. What should we consider?’
Hands shoot up. Bespectacled Alan notes that the more seeds we sow, the more money we make. Mansoor points out we’ll have to calculate the price of each seed, as seeds are sold in packets of hundreds. Another voice pipes up that we can’t price the vegetables too high, or nobody will buy them. Other issues are discussed — what will be the cost of total outlay, of compost, fertiliser, pots? What if some seeds don’t germinate? Why might it be cleverer to charge £1.99 rather than £2? Should we undercut the neighbourhood garden centre? Would that be nasty, considering we’re all in a recession? (‘I don’t see why not,’ someone says stoutly. ‘We’ll be spending a lot of time on this thing.’)
The class, populated with a number of students from lower-income families, is having a maths lesson. Sometimes, like today, Mrs Taylor incorporates into the lesson everyday situations and problems for which mathematics comes in handy. There’s also a conscious effort to plant the seeds of financial knowledge and responsibility. In other words, the children are being given financial education, a subject that’s already taken root in many countries, from Canada to Brazil.
In the UK, the main champion of financial education is a charity called the Personal Finance Education Group or pfeg. This is an outfit run from Shoreditch in London that helps schools plan and teach personal finance, often in a cross-curricular way (as part of maths, say, or so-called ‘Personal Social Health & Economic’ studies). Thanks partly to the organisation’s efforts, an All-Party Parliamentary Group on Financial Education for Young People was formed last year — with 226 cross-party MPs and peers, it’s the largest such group in parliament.
It’s pfeg that’s advising Yeading school, where the topic seems all the more crucial, seeing as children from disadvantaged backgrounds need all the financial acumen they can get.
‘Children can be taught personal finance from as young as four,’ says its chief executive Wendy van den Hende. ‘They start to learn things such as coin recognition and simple budgeting.’
How badly do the young need training in financial matters? Children make decisions on money at an earlier age than ever — 98 per cent of 11- to 17-year-olds have their own money — while the financial industry has never been more complex. By the time British youths are 17, more than half of them are, or have been, in debt. The Financial Services Authority has found that people in their twenties are the least capable age group at making ends meet.
But let’s forget the youngsters for a moment. How about us, the adults? When George Osborne gets on his soapbox to present the Budget, as he waves about that nifty red briefcase of his, how many of us really understand the difference between debt and deficit? What, exactly, is quantitative easing? What would happen if Britain loses its AAA rating? Come to think of it, every time there’s a credit downgrade, why does the media have to explain, yet again, what a debt rating is?
The truth is, three parties were involved in the global financial catastrophe of 2008. The first party, of course, were the evil bankers who repackaged sub-prime as prime loans. The second were government and policy makers who failed to prevent this happening (or who even encouraged it).
The third party, unfortunately, was us. Nobody, after all, puts a gun to our heads to force us to sign up to our second, unaffordable mortgage. Nobody demands that we max out our credit cards, without knowing exactly what the interest rates and late charges are. And how many of us, after the 2008 credit crunch, and now with another financial crisis seemingly looming, have bothered to find out a bit more about the banking industry, about hedge funds, private equity firms, financial derivatives? Or even about basic products — student loans, mobile contracts — that influence every part of our lives?
As capitalism goes through a crisis, and people everywhere question the wisdom of unbridled markets, we seem to have forgotten that, in a world where there’s free movement of goods and information, we’re all at liberty to arm ourselves with knowledge.
Why do many of us have a mental block about finance? Perhaps it’s because so much of the industry seems inhuman. The numbers, the ledgers, the very idea of making money out of money — all seem counter-intuitive to how we relate to each other. Whether this happened randomly, or is part of the economic ‘barriers to entry’ set up by the banking sector, is debatable. But it can be daunting and — worse — boring. One in four adults in the UK is functionally innumerate, studies show. The FSA has found low levels of financial capability throughout the population — a failure to understand risk, to plan ahead, to save for a ‘rainy day’.
Back to school, then. There’s been a groundswell of support for financial education across the world in the past decade. Japan, New Zealand, Spain, Korea, Malaysia, the Czech Republic, Hungary, Poland, two states in India and several in the US — all have made personal finance an official school subject. Upper Austria introduced a ‘financial driving licence’ for young people in 2006.
In England, pfeg and the aforementioned parliamentary group are pushing for financial education to be part of the curriculum. Michael Gove has made positive noises, but nothing has been introduced so far.
As Osborne continues to win praise for his ‘courage’ in sticking to his austerity plan, here’s an interesting stat. Only 9 per cent of us realise that the government intends to raise — not lower — the national debt. Britain’s debt, already an eye-watering £1 trillion, will jump to £1.4 trillion by 2015. How have Cameron and co pulled the wool over our eyes? Too few of us know the difference between debt and deficit, that’s why.