Personal finance education will be part of the national curriculum in secondary schools from September 2014. Should protection insurance be part of the discussion, and do you think this would help spread awareness by talking to younger people?
Martin Werth, UnderwriteMe
Protection insurance is a fundamental component of personal finance education. If budgeting and saving is one side of the coin, insurance and future life events are the other. To resonate with young people, finance education has to make them resilient to real-life issues. Understanding uncertainty is central to equipping the young with the skills and knowledge to manage their money confidently.
School leavers need to be well prepared for a lifetime of financial decision making – from managing monthly outgoings on rent and food to the long-term responsibilities of a mortgage, marriage and parenting.
The future is uncertain and will become increasingly uncertain over a working life of four decades. While human nature hopes for the best, an essential part of financial education should be to consider the worst, and how to mitigate adverse events.
The young will not be surprised that the state only provides a subsistence benefit when things go wrong, and they must take personal responsibility for their financial wellbeing.
Financial education should teach people to be resilient by building a savings buffer for the more frequent smaller adverse events, and insuring against the infrequent more extreme adverse events. The earlier this is purchased, the lower the costs, as the potential risks are further in the future.
Financial education and empowerment for the young could not be more important than it is now, when they face a tsunami of potentially life-changing offers of easy credit, online gambling and the zeitgeist message is risk all and live for today.
Louise Colley, Aviva
I think back to when I was at school and I know teenagers do not think about this. Even generally, they don’t think about how to run a household, what bills you have to pay and how you make sure you’re financially resilient when you have an income. How would you get by if you lost that?
The key thing this needs to address is that the state is not there to provide. It’s important that teenagers have a sense of responsibility in how they plan their financial futures.
We all know teenagers live for today, so giving them some discipline and the chance to think about the ‘what ifs’ will be a really good exercise for them.
An interesting dynamic, which we need to manage sensitively, is that there will be children in those classrooms with family members who have suffered a serious illness, who would have seen the subsequent devastation to a family unit.
This is not something teenagers would talk about openly, but it would come to the fore in these modules.
There would need to be that explanation and understanding that there would be pupils who would have experienced that impact on their family life and their finances.
We have a challenge in engaging parents with this subject matter, so engaging teenagers is the next level. It’s about making this subject an important one, as these are the things we don’t want to talk about. The way it’s delivered will have a real impact.
Tom Conner, Drewberry Insurance
It is excellent news that personal finance will become part of the national curriculum this academic year. I think in the years to come we’ll look back in astonishment that this didn’t happen earlier.
The level of household debt and the underutilisation of protection insurance is a clear indication something has to happen to educate the public, and the best place to start is in the classroom, where the principles of prudent financial planning can really be ingrained.
There is no question in my mind that protection insurance should be included in the curriculum, as it is an essential part of a family’s financial planning. Most of us in the industry know there is a real lack of knowledge among the general public of the need for protection, the types of products available and where to go for advice and information.
There are misconceptions about the risk of death or incapacity, the level of employer support, the benefits available from the state and even the integrity of insurers to pay valid claims. When all these factors are combined it is no wonder the protection gap in the UK is so large.
Educating children from a young age about protection is a real opportunity to erase these misconceptions, increase protection take-up and deal a desperately necessary blow to the protection gap. Not only will this benefit those children in the years to come, it will also benefit the economy as a whole.
Kevin Carr, Protection Review
Around eight years ago COVER celebrated its tenth anniversary with a list of the most influential people in the industry at the time. I was both flattered and honoured to be named, not only to be considered alongside the likes of Tom Baigrie, Peter Le Beau, Nick Kirwan, Roger Edwards and others, but mainly because Alf Roberts and Gordon Brown were also on the list!
One of the questions we were asked was what one thing we would change overnight about the protection industry if we could, and I said financial education in schools.
I turned 39 last month and ever since leaving school I’ve have been baffled as to why you can leave (allegedly) knowing how to work out the angle of a triangle and how to find your bearings if lost at sea, yet many people finishing their education and joining the workforce struggle to understand their pay slip – let alone the ins and outs of important financial issues such as pensions, mortgages and insurance.
Should protection be included? Absolutely. It is the foundation of financial planning and is arguably more important than any investment allocation. The cost of protection may be prohibitive to some, but understanding the cost of not having it when you might need it is equally important.
I believe we would see a better protected population of families as a result of a good financial services education – and, what’s more, we might just see fewer people being ripped off by financial services products as a whole too.