11 February 2022

By John Jerrim

In the previous blog in this series I investigated socio-economic differences in young people’s financial skills. This focused upon the types of financial questions that young people from advantaged backgrounds can successfully answer, that their peers from disadvantaged backgrounds can’t.

In this next blog, I start to consider socio-economic differences in one of the key inputs into the development of young people’s financial skills – the role of their parents. Are there certain things that higher-income parents do with their offspring to nurture their financial skills, that lower-income parents do not?

Lets take a look (with further details available in the academic paper here). (more…)

11 February 2022

By John Jerrim

In the third blog in this series I started to investigate socio-economic differences in the inputs into young people’s financial skills, focusing upon the role of parents.

Schools, of course, also have a key role in helping to develop children’s financial skills. Therefore, in this final blog of the series, we turn to socio-economic gaps in the provision of financial education within primary and secondary schools.

Big gaps in primary schools

Let’s start by looking at what happens in primary school. Figure 1 illustrates the percent of primary pupils who say they have been taught various financial skills at school, stratified by socio-economic background.

There are two striking results. (more…)

10 February 2022

By John Jerrim 

In an increasingly complex financial world, it is important that we ensure young people develop a sound knowledge of financial issues and possess key financial skills. This is particularly important for young people from disadvantaged socio-economic backgrounds who, unfortunately, are the most likely to struggle financially during adulthood and become entrapped in a cycle of poverty and debt.

Yet, in the UK, we know relatively little about children’s financial capabilities, including differences between socio-economic groups, and the age when such gaps start to develop.

Along with Jake Anders, and Lindsey Macmillan, I have tackled this issue in a new academic paper. This uses data from the 2019 Children and Young People’s Financial Capability Survey – based upon responses from 3,745 children from across the UK.

Spoiler alert! The gaps are pretty big, and emerge pretty early. (more…)

10 February 2022

By John Jerrim

The first blog in this series illustrated how there are substantial socio-economic gaps in children’s financial literacy skills, with these differences emerging before the start of primary school.

But what exactly can rich kids do – in terms of their financial knowledge and skills – that poor kids can’t?

This blog takes a closer look. (more…)

1 May 2019

By Jennie Golding

At present I am leading a fascinating set of research studies that take me into mathematics classrooms of the full range of 5 to 18-year-olds. We are asking how the current mathematics curriculum is being experienced by teachers and learners, and how, and in what ways, they are being supported by printed and digital curriculum materials.

The national curriculum says mathematics ‘is essential to everyday life, … and necessary for financial literacy and most forms of employment’. As part of our research, I’ve recently been in two classrooms where the focus of the lesson has been to develop mathematical ideas, and everyday skills, through the use of money. What I observed shocked me into asking fundamental questions about the ways in which we as a twenty-first society educate our young people to be financially capable. (more…)

Ian Marcouse
One mis-selling scandal after another has highlighted how bad adults are at managing their own financial resources. They trust the wrong people and believe in the wrong advice. The ease with which payday lenders found customers shows the difficulty people have with APR (annual percentage rate) figures. Even taking out a current account is fraught with risk. For young people about to stack up a huge amount of debt at university, financial literacy is vital, if only to avoid their parents’ mistakes.
The UK Government sought to tackle the issue last year by announcing that financial literacy would become a compulsory part of England’s national curriculum – included both in mathematics and citizenship classes. This covers about half the state schools in the country – with academies and free schools allowed to opt out.
Unfortunately, new findings from the OECD suggest that there is virtually no correlation between the amount of time spent teaching financial literacy in classrooms and students’ ability to answer questions on the subject. Nor did it matter much whether financial literacy was taught by teachers of mathematics, economics/business or social sciences.
But could their analysis be misleading?
The OECD’s PISA programme administered a two-hour test to half a million students from 16 countries to try to assess young people’s financial literacy. These countries included the US and China, but not the UK.
The report, published this month, showed a very high correlation between PISA results for mathematics and those for financial literacy. Consequently China (Shanghai) came top by a large margin, while the USA performed below the 16-country average. Bottom came Colombia. According to the PISA findings the most important factor by far was how well the respondents had been taught mathematics.
But these results were not surprising, as the questions were strongly weighted towards numeracy (such as checking the accuracy of an invoice). An alternative explanation might be that this weighting made the correlation with maths results inevitable. If the questions had been focused on a critical approach to financial issues and products, the results may have been different.
The research looked at many variables that might determine student performance at financial literacy. It concluded that the amount of time spent teaching financial literacy had no effect. For example teachers in the United States spend a particularly long time on the topic – to no discernable benefit on test results. Furthermore the quantity of teacher training had little impact on the results. On average about half of all teachers of financial literacy had received some training on the subject – but to no avail. (The quality of the teacher training was not assessed.)
Other variables that proved unimportant included country GDP per capita, gender and social background. More important was direct experience: those with a bank account came out with higher scores than those without.
Specifically the PISA report says, in answer to the question: “What can be done to enhance financial literacy?”

• Having a bank account is a better predictor of financial literacy than anything you do in the classroom.
• Teaching financial literacy is a poor predictor of success at financial literacy in these tests
• Where financial literacy is taught as a separate subject (such as the USA) performance is not strong.
• Volume of exposure to financial education has no correlation with performance on the tests

From PISA’s viewpoint the findings are clear: teach mathematics in a more conceptual, abstract manner (as in Shanghai) and students will be in a better position to apply their understanding to real contexts. The question remains: is the extremely high correlation between maths and financial literacy simply a result of the construction of the tests? If so, policy makers should take great care about drawing conclusions from PISA’s exercise.
What was the purpose behind such a numerically-driven series of questions? There are many other factors in financial literacy, such as questions about past problems and scandals (Bernard Madoff; Charles Ponzi) plus the pyramid schemes that young adults can often be caught up in. There is the fundamental problem of asymmetric information, in which the seller of financial products knows so much more than the buyer. These issues were not addressed.
This leaves two possibilities: either teaching financial literacy is a waste of time (the PISA conclusion) or perhaps PISA did thorough research based on the wrong questions. In 2015 they will repeat the exercise (and may include Britain this time). Let us hope they think hard about whether they want to repeat the questions.