HC 271 Money Advice Service

Written evidence submitted by pfeg


1. It is always important, but in the current economic climate pfeg believes strongly that financial capability is crucial if future generations of adults are to make the right financial decisions for themselves, their families and the national economy. Prevention is better than cure. Personal finance education is a fundamental building block for life. pfeg believes that by educating children and young people to understand and manage their finances, we can build a generation of empowered consumers able to deal with financial challenges such as student debt, unemployment, pregnancy, negative housing equity and loss of income due to ill-health. A summary of our submission is as follows:

· The MAS has a crucial role to play in creating financially capable children and young people

· Children and young people should be an essential audience for the MAS. The current omission of 4 to 15 year olds in the MAS work will severely challenge financial literacy levels in the UK and impact the UK’s international standing

· The MAS is currently not achieving its core objectives in relation to children and young people below the age of 16 and pfeg believes the objectives need to be more accountable, realistic and deliverable

· Children and young people are currently active in the marketplace and need guidance to prevent them becoming irresponsible consumers as adults

· The MAS should have a greater role in financial education in schools by:

i. Offering national leadership on a financial capability strategy which is internationally credible; advising the Department for Education on curriculum content, delivery, initial teacher training and continuing professional development

ii. Spearheading a drive for the UK to participate in the 2015 PISA assessments of financial literacy without delay

iii. Providing UK wide guidance, oversight and coordination of personal finance resources aimed at children and young people in schools

· The financial services levy should contribute to financial education in schools as many subscribers anticipate.


2. pfeg (Personal Finance Education Group) welcomes the opportunity to submit evidence to the Treasury Select Committee Sub-Committee on the future of the Money Advice Service (MAS).

3. pfeg is an independent charity helping teachers plan and teach personal finance relevant to students' lives and needs. Our mission is to ensure that all 4-19 year olds can have financial education – giving them the skills, knowledge and confidence in money matters to thrive in our society.

4. pfeg provides free support, resources and expert consultancy to make learning about money easy. We know that each school or college is unique, and we provide a bespoke service which is accessed through our free advice line, website and face-to face sessions. We have worked with 151 local authorities, reaching 54% of primary and 88% of secondary schools in England.

5. pfeg also works with government, opinion formers and key bodies, campaigning for consistent, quality financial education for children and young people across the UK. We provide the secretariat for the All-Party Parliamentary Group on Financial Education for Young People. There are 225 cross-party members making it the largest active APPG. pfeg is not affiliated to any one organisation and does not market or sell any financial products or services.

Response to inquiry questions

To what extent is the MAS meeting its core objectives:

· to enhance the understanding and knowledge of members of the public of financial matters (including the UK financial system), and

· to enhance the ability of members of the public to manage their own financial affairs?

6. pfeg believes the MAS is not reaching its core objectives. As stated in the Money Advice Service 2012/13 Business Plan, there is currently no work stream focusing on financial education for children and young people under the age of 16. We believe this is an oversight and contend that children and young people are a key audience for the MAS. Financial education is of vital importance as it ‘prepares pupils at the school for the opportunities, responsibilities and experiences of later life’ [1] . In our view, the MAS is not fulfilling its remit to enhance the understanding and knowledge of financial matters for members of the public below that age, and are not enhancing their ability to manage their own financial affairs.

Are these the right objectives for the MAS to have?

7. pfeg believes objectives should be specific, realistic and deliverable, which makes an organisation accountable. Whilst we wholeheartedly welcome the purpose of the MAS work to improve financial knowledge and understanding, and an individual’s ability to manage money, we believe these core objectives need to be written in a way that identifies measurable outcomes and creates a firm baseline of success.

8. We also note that the Business Plan states repeatedly that services are for ‘everyone’ (heading on page 9 Ensuring everyone can use the Money Advice Service). pfeg questions the interpretation of ‘everyone’ and asks for them to include children and young people under the age of 16 in their definition.

Is the MAS reaching its target audience?

9. O n page 21 of the Business Plan, in the section entitled ‘ Focussing on young people the MAS states they are addressing ‘ the needs of young adults aged 16 and over who are starting to make financial decisions in their everyday lives’ . pfeg has significant evidence to show that children ‘ are starting to make financial decisions at a much earlier age . A study by pfeg found that almost all (98%) of the 11-17 year olds they spoke to had money of their own [2] . Those aged between 4 and 15 years are not currently reached by the MAS. pfeg strongly advocates continuous financial education from the age of four.

Are any groups unable to access the MAS services?

10. Whilst ‘everyone’ could access some of the services provided by the MAS (i.e. through the website), in reality these are not directed at those under 16 years. In addition, pfeg is concerned that has a concern for a variety of groups under the age of 16 with whom we work both in and out of mainstream schooling. For example, managing money is a particular issue for young offenders, pupils excluded from school, those with special education needs and disabilities and young people at risk of pregnancy. From our experience, these groups need face-to-face interventions and, key to their progress, is the ability of the teacher or trainer to deliver effectively. pfeg recommends that the MAS reconsiders how services are accessed and by whom.

Who is worst affected by a lack of knowledge of financial matters?

11. UK’s outstanding personal debt stood at £1.548 trillion at the end of March 2012. pfeg knows that children and young people are contributing to this. It is a great concern to pfeg that the MAS is not directing services at all children and young people. pfeg believes strongly that if we are to enable future generations of young people to manage their finances well, those under 16 years must be given high quality financial education in school so they can make informed choices and take responsibility for their own actions. Prevention is better than cure, being both cheaper, effective and potentially less damaging.

12. Children and young people are making financial decisions themselves at a very early age. A Populus [3] survey conducted for pfeg showed that one in five children has used their parents’ or older siblings’ credit or debit card to purchase items online; for those children who have purchased items online, 10 is the average age they begin doing so; and the average age at which children first have their own mobile phone is eight. Without education, these activities make children and young people extremely vulnerable.

13. EdComs Research [4] also shows that as children get older, bad habits can start to show; over 75% of 7 to 11 year olds are saving their money but by the time they get to 17 over half of them are in debt to family and friends and over 26% see a credit card or overdraft as a way of extending their spending power. A YouGov survey in 2008 found 70% of 18-24 year olds were in debt [5] .

14. Young people don’t only get into debt, they worry about money. Nine in ten 14-18 year olds say they worry about money on a daily basis [6] . pfeg is concerned that financial worries will become an even bigger problem in the future. In 2009 the FSA made a significant correlation between anxiety or depression and a lack of financial capability [7] . The UK is currently faced with high youth unemployment figures at 22.2% [8] . Research prior to the recession showed that 51% of teenagers would like to learn how to control their spending. In 2011, 90% of teenagers said they thought learning about money was important [9] .

"Can you enjoy yourself with money? No, because you worry about bills and taxes"

14 year old, South East

15. pfeg concedes that there are other groups who lack knowledge in financial matters, but children and young people are currently active in the marketplace and need guidance to prevent them becoming irresponsible and indebted consumers as adults.

Should the MAS have a greater role in financial education in schools?

16. Yes, pfeg believes that if the MAS is to achieve its statutory objectives it must start to connect with people as early as possible and statutory schooling gives access to a whole cohort. pfeg takes the view that if there was a coherent approach in schools, starting in primary years and leading through to the end of secondary education the need for debt advice would be minimised.

17. We believe there are two compelling areas where active support by the MAS for financial education in schools will have a significant benefit.

· National leadership on a financial capability strategy which is internationally credible and

· Enabling future generations of adults have the financial acumen to manage their money

18. pfeg believes the momentum has been lost following the introduction of the FSA’s National Strategy on Financial Capability. pfeg appreciates that financial education in schools is predominantly a matter for the Department for Education but we see a key role for the MAS in advising the Department on curriculum content, delivery, initial teacher training and continuing professional development. As a commissioning body, the MAS has a fundamental part to play in providing UK wide guidance, oversight and coordination of personal finance resources aimed at children and young people in schools.

19. Through a structured programme of teacher training and the development of accredited resources pfeg has been helping financial education in schools. As part of the FSA’s Financial Capability strand, pfeg received funding for five years and reached in excess of 4,200 secondary schools/colleges, pupil referral units and independent schools with high quality advice and training. FSA’s leadership was key in ensuring financial education was a priority. The MAS can, we believe provide a strong framework of guidance and advice to teachers and schools which will lead to the consistent delivery of internationally credible financial literacy going forward.

20. pfeg would like to draw the Committee’s attention to the December 2011 inquiry on Financial Education and the Curriculum by All Party Parliamentary Group on Financial Education for Young People which concluded that ‘Unless more children and young people in England learn about personal finance, there is a risk they will lag behind many other countries." [10] This advice should not be ignored.

21. The Expert Panel for the National Curriculum review also supports a need for financial education; it stated that in high performing jurisdictions ‘the education of pupils is expected to contribute to their own future economic wellbeing and that of the nation or region’ [11] pfeg has contributed to the current National Curriculum and PSHE education reviews to highlight the importance of financial education in the development of well rounded individuals. pfeg would support the MAS fully if they were to take a strategy lead in this area.

22. From an international perspective the global and G20 recognition of the importance of financial education and consumer protection, has led to an increased number of dedicated national strategies. Countries such as Zambia have robust national strategies which are driving educational change. Australia and New Zealand are leading the field by including financial education in their statutory provision. The OECD sees schools as ‘a place to develop youth’s savvy financial habits and skills and a place to reach parents and the wider community [12] .’ This year, the OECD’s Programme for International Student Assessment (PISA) pilots a financial literacy test for 15 year olds. England has opted out of the pilot and has not yet chosen to participate in the 2015 assessments. PISA results data is rated highly in the education community.

23. pfeg believes the MAS should spearhead a drive for the UK to participate in the 2015 PISA assessments of financial literacy without delay. The OECD requires countries to opt in by mid-June 2012. By communicating the importance of this for children and young people’s development, and for future education policy to the Department for Education, the MAS would be fulfilling its core objectives and acting as a champion behaviour change in financial literacy.

24. With this in mind, pfeg welcomes the MAS statement in the Business Plan which says: ‘We believe the most valuable contribution we can make is to use our independent status to look at how best to provide financial education for young people in order to increase impact and change behaviour.’ [13]

"Financial education is a key aspect of life... how can people be expected to move out of home, to manage bills and higher fees for education whilst avoiding getting into debts with no background knowledge to handle their money efficiently? People should be taught how to avoid getting into debt."

Alex Harman, Member of Arun Youth Council

25. People are becoming financially active younger and are facing more complex financial decisions than their parents. The most cost effective way of preventing over indebtedness and other financial problems is to have young people equipped to make better informed and appropriate decisions for their circumstances and aspirations. In addition, increased longevity together with different lifestyle expectations means that young people will need to save and invest for their future.

26. pfeg believes it is particularly important that children are given the opportunity to learn how to manage their money regardless of parents’ ability to provide this at home. Research has shown that 43% of parents do not know what basic financial terms like APR or PPI mean [14] . Parents can, and do make poor financial decisions which directly impact their children and parents themselves often feel inadequate. In pfeg’s What Money Means research 79% of parents felt it was important that children of 9 and 10 years should learn about money and financial matters at school [15] . And in a YouGov poll 93% of teachers and parents thought that personal finance education should be taught in schools [16] .

27. The APPG inquiry entitled Financial Education and the Curriculum found: "There are a number of aspects of personal finance that were frequently raised as important for students’ financial capability in the oral evidence sessions. These primarily included financial products, bank accounts, loans and budgeting." If parents are not confident in these areas the information they pass on could be unhelpful. pfeg experience of working directly in primary and secondary schools has clearly shown that pupils do take home their learning and actively change their parents’ behaviour.

"It is not just about savings. It’s about children prioritising their needs and wants, understanding that not everything comes at once and that some things are worth waiting for. It is about realistically managing your resources."

Cumbrian primary school head

How appropriate is the model, using fees raised from financial services firms regulated by the FSA, by which the MAS is funded?

28. pfeg has had many discussions with industry representatives whose organisations contribute to the financial services levy. They have reported to us that they are surprised to find that their funds are not being used for educating those under the age of 16. Regardless of how appropriate the model is the funds are not being used in the way that some of the subscribers anticipated.

29. One of the MAS statutory functions (quoted in the Money Advice Service 2012/13 Business Plan, page 4) is ‘publishing educational materials or the carrying out of other educational activities’. Those organisations contributing to the levy might expect this to include those under the age of 16.

[1] Education Act 2002, Section 78

[2] Personal Finance Education Group, Money on Our Minds . July 2010

[3] Populus, Feb 2009

[4] EdComs Research, January 2007

[5] Ryanair services “ Why do young people pay more? ”, 2008

[6] EDComs, January 2007

[7] Financial Capability and Wellbeing, Evidence from the BHPS 2009

[8] 17 to 24 year olds FEdS Consultancy Briefing April 2012

[9] RBS Group MoneySense research May 2012: 50,000 12-19 year olds

[10] P34, Financial Education and the curriculum, APPG Financial Education for Young People

[11] The Framework for the National Curriculum A report by the Expert Panel for the National Curriculum review, Department for Education, December 2011

[12] Financial Literacy PISA Assessment, powerpoint presentation by Flore-Anne Messy, Executive Secretary of the International Network on Finance Education, OECD.

[13] P20, Money Advice Service Business Plan 2012/13

[14] Capital One, www.capitalone.co.uk/media/media-centre.jsf July 2 011, retrieved 11 November 2011

[15] Personal Finance Education Group. What Money Means . 2010

[16] Association of Investment Companies, January 2007

Prepared 15th June 2012