Cash in a Cashless Society

Victoria Lambert looks at how schools are teaching financial literacy for the 21st century

The pandemic has certainly taught us all one thing: cash is no longer king. Instead, most of us now behave like the Queen, carrying no notes or coins of any kind. We tap our way around shops and petrol stations, barely noticing the way they have allowed us to increase our unconscious spend by 50 per cent now they have been boosted up to £45. For larger purchases there are bank transfers via apps. Or credit, via apps. Not to mention the surge in use of shop credit systems such as Klarna, fast purchases via Apple Pay or – my personal guilty habit – saving your card details into eBay so bargains can be snapped up faster than ever.

But at least, we adults have some concept of what these streamlined payments mean; of the value in hours worked for that iTunes splurge. Without a physical connection what hope do our children have of gaining that instinctive comprehension of what money is?

Thankfully, many schools are teaching financial literacy now to make sure that pupils leave for university with a feeling for what money is, plus a wider understanding of how it works in society from credit ratings to hedge funds.

At Winchester College, Tom Quayle, head of PSHEE explains that for younger years, the first strands of financial literacy are found in maths classes: learning percentages and statistics.

The real work begins in sixth form, however. ‘We do university prep,’ says Quayle, ‘which means personal and student finance, and then move on to the different careers in finance.

‘There is also a voluntary strand covering entrepreneurship where boys will learn about start-ups and venture capital.’

Jane Prescott, headmistress at Portsmouth High School, GDST, agrees that financial education is vital. ‘Young people need financial acumen to be able to navigate the complicated and attractive offerings that face them, from buying phone contracts to using credit cards. It has never been so easy to pay for goods and getting into debt soon becomes a way of life.’

Teenagers are confused, says Prescott, ‘because on the one hand they are encouraged to take out student loans to pay for university tuition and accept that at some point they are likely to be saddled with the responsibility of a mortgage, but then they are told to be cautious about other forms of credit.

‘Young people need time-appropriate information to keep it real to their situation, and more importantly, where to access up-to-date advice so that they are able to navigate what is an ever-changing landscape. Knowledge and the ability to make informed decisions is crucial to their long-term financial security.’

As part of the Girls’ Day School Trust, Portsmouth High can access enrichment modules delivered by learning and development manager Karen Kimura, which are currently delivered online. ‘I compare money to fire,’ says Kimura. ‘Dangerous but useful.’

Kimura teaches three areas: for younger students, conversations run around the value of money – ‘Do I need it, Can I afford it, Can I get it cheaper?’ is a favourite line – and students learn about bad debt (unplanned purchases) versus good debt (mortgages, student loans). Budgeting and saving are key terms.

In the senior years, the conversation steps up. ‘We talk about student finances,’ explains Kimura. ‘It’s not just about loans, but also the point of insurance, whether they have to buy TV licences, where they can go for help. About one in seven students use their loan up in the first week.’

Lastly, Kimura talks about pay and how to ask for a raise. ‘Girls especially need to know that they can and should be able to ask for more. We talk about building your personal brand and how to negotiate.’

There is help outside schools, too. Sheena Doherty teaches finances via her website on a bespoke basis as well as in classes, and has delivered sixth-form sessions at Rishworth School in West Yorkshire.

She is keen that young people learn about pensions early on. ‘The vast majority are employed by SMEs now,’ she explains, ‘not large corporations. So you have to be in control of your own pension. I want to embed into young people that they must have a plan. The difference in saving for a pension in your 20s even to starting in your 30s is enormous.’

Doherty, who is a principal partner at St James’s Place Wealth Management which is authorised and regulated by the Financial Conduct Authority, explains how opening a cash ISA when you get your first job can be beneficial and the importance of learning to save on a regular basis. ‘Teaching young people about compound interest is a lightbulb moment for many,’ she says.

To combat the way cashless society makes spending too easy she encourages teenagers to keep a diary so they can see what they are spending, and how. ‘You must find a way of auditing yourself; create categories so it’s clear where your money is going.’ This is particularly useful for the first term at university, she adds.

Emma Hammond, financial planner at Charles Stanley, suggests parents get involved. ‘A monthly allowance is a good place to start.’ She adds that parents should help to work on budgeting.

Loan children money for larger purchases, Hammond advises. ‘This is a good opportunity to also explain how credit works, such as any interest you may have to pay or fees for delayed payments.’

You can also discuss credit scores. ‘Getting them on the electoral register and if they already have a bank account, applying for and getting accepted for a credit card will help boost their score.’

Hammond also thinks parents can teach safe investing. ‘There are various platforms to invest,’ she says, ‘but an easy way to get started is setting up a stocks and shares ISA with your children and encouraging them to invest a portion of their allowance or earnings each month. Plus it’s tax-efficient!’

‘Investing into stocks and shares does carry a degree of market risk though, but there are many very decent self-direct websites in the UK that will guide you through the risk process and even suggest an investment strategy.’

Thankfully, most young people seem keen to engage. Tom Quayle says the last student and personal finance course he offered was oversubscribed.

Danny Davies, head of PSHE at Haberdashers’ Aske’s School for Girls, thinks that this new generation are perhaps savvier than we think when it comes to being cash free. Davies explains: ‘We are a cashless school, so they are used to cards and thumbprints; most have never heard of a cheque.’

But the school is keen to cover financial awareness in as many ways as possible. ‘We look at debt from different angles,’ he says. ‘We touch upon online gambling and explain about why you can’t default on debt without it having implications on future credit.’

The school also sets exercises which include matching a financial term such as arrears or ISA and its definition from a list. ‘We encourage them to go through that with their parents or guardians. It starts conversations.’

Sheena Doherty agrees that open discussions are key. ‘Many people aren’t open about their finances, but this is such an important life skill to learn.’