Author: Jerry Mulle
Studies show that students who received financial literacy education in school are far more responsible when it comes to money. It seems obvious, but whose responsibility is it and how can technology help?
According to a study of US college students, conducted by Money Matters on Campus, and reported recently by Reuters:
“findings show that students who received financial literacy education in high school … are significantly more responsible when it comes to money.”
One would hope so, but it’s nice to see it in writing.
We’d all benefit from a greater understanding of how different savings accounts, payday loans, pension plans, insurance policies or mortgage terms would affect us so who should take the lead in improving our education?
Financial literacy education in schools
The Welsh Government has already developed a suite of financial education materials for use by primary and secondary school teachers and from September 2014 financial education will form part of the compulsory ‘Citizenship’ curriculum taught to 11 – 16 year olds in England.
Making financial literacy part of our children’s education is a huge step forward and by itself should make a big difference. As with any subject in the packed school day it can only benefit from further support outside the classroom.
Parents have a duty to educate themselves first
So what role should parents play in ensuring our next generation grow up money-smart and savings-savvy?
Parents can help to make what children learn in school real by showing them in practical ways why financial literacy is important and how it’s used in their own lives.
To support their children effectively some parents will need to improve their own financial literacy and for that they might reasonably turn to their own banks and ask “how are you going to help me?”
Can banks be trusted to educate us about money?
Some banks are already going into schools and educating children and teenagers about financial matters.
This might sound like asking McDonalds to teach children about nutrition but banks have considerable resources and expertise to bring to bear and a strong motive for doing a responsible job. In the wake of the credit crunch banks have a rock-bottom reputation and helping to educate children and adults about money matters, both inside and outside the classroom, is an exercise in rebuilding trust.
The commercial benefit banks might receive from talking to students should not be overlooked but included in the teaching itself. Understanding how banks work and how they make money is itself an important part of financial literacy.
The most important role for banks though is outside of the classroom, online.
Delivering education online
The Internet is the perfect place to provide financial literacy education because it can be used to deliver realistic and personal training at the moment it’s most relevant.
Cutting edge web businesses increasingly make use of short videos or tips to educate users about changes to their services or things they may have missed. Typically the training only appears once and, most importantly, it only appears when you’re doing something it can help you with.
I’d like to see banks adopting this technique to deliver financial education when and where it’s most useful – such as offering consumers a quick refresher on trackers vs. fixed rates when they investigate a bank’s mortgage products for the first time.
Websites and apps can also offer us the priceless opportunity to learn about things by actually doing them.
Online share dealing services already offer ‘fantasy’ portfolios where users can make virtual investments and experience the ups and downs of investing in shares without losing or making any money. With the exception of what’s at stake the fantasy portfolios are indistinguishable from the real thing.
There’s no reason why we shouldn’t be able to experience our bank’s online products, reporting and support by actually using them before we sign up to anything.
Test-driving a bank account might not sound all that exciting but the digital world can help there too.
From Elite to Eve Online, computer games have a thirty-year pedigree of getting young people and adults engaged and enthused by the nitty-gritty of budget management and resource allocation.
Computer games can teach us a lot about how to hold somebody’s attention and the techniques that make them so compelling are increasingly being used outside of games to inject fun and satisfaction into the most mundane of online chores.
Gamification has already made significant inroads on social media sites like LinkedIn. If it can transform the drudgery of writing a CV into something satisfying and fun then it’s only a matter of time before we see it deployed in the competitive world of online finance.
I think that with a bit of imagination the dullest savings account could be brought to life and shown for what it really is – the means to secure a new bike, a holiday or whatever else it is you’re saving for.
Banks are uniquely placed to deliver relevant, contextual, engaging and experiential financial education. They won’t and shouldn’t supplant schools or parents but they have a pivotal role to play in supporting both.