The morally blind leading the arithmetically blind
–Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.–
Youâ€™ve got to admire the endless inventiveness of our politicians. Just when you think thereâ€™s nothing new under the sun, they catch you out by coming up with an idea so bad nobody seems to have thought of it before.
Now the All-Party (or was it All-night Party?) Parliamentary Group on Financial Education for Young People has come up with the daftest idea Iâ€™ve heard since the previous Governmentâ€™s idiotic Home Information Pack scheme, but which threatens to do far more serious damage. They propose, in the FTâ€™s words, that â€śHigh street banks responsible for some of the worst consumer mis-selling scandals of the past decade will be invited into British schools to help teach financial educationâ€ť.
I had to read this paragraph two or three times, then ask myself if it was April 1st, before digesting the craziness of this idea. Presumably it will be followed by an invitation to Silvio Berlusconi to lecture our MPs on ethical behaviour in politics. After all, most people would expect a course in prudent personal financial management to start with the lesson: â€śWhatever you do, donâ€™t take advice from your bankâ€ť.
Predictably, the general secretary of the largest teachersâ€™ union is worried about kids being exposed to banks trying to brainwash them into loyalty to their brand, a fear which is surely overdone (just wait till the bloke from Barclays starts giving them homework) and is certainly not the thing that is going to keep me awake at night.
The main reason I would never want to stand in front of a class of schoolkids and attempt to teach them personal finance is that in far too many cases British teenagers (and very often their parents) canâ€™t cope with arithmetic, let alone any more advanced maths, so the exercise is doomed to failure from the outset. How can anyone understand consumer loans and mortgages if they canâ€™t do arithmetic? How can you get to grips with insurance, annuities and pension calculations if youâ€™re incapable of calculating an average, let alone appreciating the difference between a conditional and an unconditional probability?
Moreover, the whole idea is based on a misunderstanding of what schools ought to be doing.Faced with a proposal to teach children something new, there are always two questions we need to ask: What is the opportunity cost of the addition to the syllabus? (To claim that the rest of the syllabus will be unaffected is like claiming that we can have higher government spending without higher taxes or higher borrowing.)Â How much benefit will be derived from the proposed new subject thirty years from now, when todayâ€™s child will be in his or her forties and, if globalisation continues at its current pace, may well be working on the other side of the world?
Youngsters need to be equipped with skills which will provide a firm foundation for learning about things as diverse as how to deal with new technologies, how to get a grasp of the issues at stake in public debate, how to make decisions about medical matters and, yes, personal finance too. To survive and thrive in the modern world means facing a daunting set of mental challenges, and the list keeps growing.
Those who go out into the world with a good grounding in the old-fashioned subjects â€“ languages (including English), history, geography, and especially maths and the sciences â€“ find it easiest to cope with the demands of the workplace, which seems to be the primary, if not only concern of those who run our education system nowadays. Young people are going to be continually asked to acquire new skills, and many of them will be forced to retrain for a completely new career at least once during their lives. Vocational and â€śpracticalâ€ť courses like personal financial planning will be far less help in that respect than learning how to write a prĂ©cis or draw a simple graph.
Just imagine for a moment what banks would have taught my generation if a scheme like this had been operating when I was at school in the 1950â€™s. No doubt, a lot of long-obsolete stuff about tax relief on life insurance and mortgage interest (and, you can be sure, the benefits of combining the two in an endowment mortgage), how to write cheques and fill in withdrawal slips, what to do with travellersâ€™ cheques and… I could go on, but nostalgia overcomes me at this point.
At any rate, if any of my old teachers are reading this, itâ€™s not too late for me to say a big thank you to them for teaching me maths and languages and history and geography, and trying to teach me physics and chemistry, instead of wasting precious time showing me how to calculate my income tax or wire up one of the old round-pinned Wylex plugs we had in those days. In the event, I managed to work those out for myself when I had to.
Altogether, you would think the scheme proposed by the All Party Group is so loopy it will be kicked into the longest of long grass, never to be seen again â€“ and maybe it will. But then, thatâ€™s what I thought when I first heard the proposal to introduce Home Information Packs, yet it became law, so we already know that MPâ€™s take an extremely benevolent view of insanity.