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My eldest daughter is currently learning to drive. Having passed the theory test, she is now focused on the practical test in a few months. As I’ve observed her preparations for passing this milestone of teenage independence, I’ve been struck by the parallels with some radical ideas I’ve formulated on the teaching of personal finance to young people.

Over the past six months I have been speaking to people aged between 16 and 24 about their experiences of learning about managing money — and how this might be improved. While I was told of examples of good teaching in some schools, the majority were generally negative about the personal finance education they received.

The topic became a statutory part of secondary education for all maintained schools in the UK a few years ago, but this does not apply to the 50 per cent of schools which are academies, free or independent schools. While organisations like the Personal Finance Education Group (Pfeg) do a commendable job providing support to schools, numerous reviews have found the quality and effectiveness of such teaching in the UK to be highly variable.

Two key themes emerged from my discussions with students. Since there is no obvious consequence arising from not engaging with personal finance education — or any clear incentive to do so — many students and their schools don’t take the subject very seriously. Students often placed personal finance in the same category as personal, social, health and economic (PSHE) education — or as one student put it, “we viewed it as the muck-about lesson”. Unmotivated, untrained or incompetent teachers (often supply or temporary staff) sometimes compounded the issue.

While practical maths and an awareness of personal budgeting, money risks, debt, saving and financial products are all useful elements of personal financial education, on their own they are unlikely to engage and motivate most students. I am convinced that personal finance education for young people needs a fundamentally different approach, requiring three radical reforms.

First, the psychological aspects of money — how we relate to it and feel about it — and the traits and emotional biases that influence our financial decision-making needs much more emphasis. Helping young people develop greater self-awareness of their “money personality” and an understanding of the implications of instinctive vs considered decision-making are essential.

The impact of peer pressure, materialism, will power, self-discipline, deferred gratification and acceptance of one’s failures and mistakes should be part of these lessons, along with the notion of our “human capital value”, in other words the net present value of our future lifetime earnings, and how modest investment in oneself can increase this value through higher future earnings. The role of spending also needs to be given much more prominence, particularly the implications of debt-funded consumption.

Student loans should be renamed — perhaps as the “graduate tax surcharge obligation” — to discourage students from entering work believing that massive debt is socially acceptable. Student loans are not debts: they are really an obligation to pay higher taxation to meet the cost of a higher level education, and then only if the graduate earns more than £21,000 a year for a maximum of 30 years. Perceptions are important and the way young people frame financial issues like tuition fees can mean the difference between them seeing themselves as a victim or a victor.

My second suggestion is to move the bulk of personal finance education out of the classroom and instead deliver it through a series of short, interactive and highly engaging online courses. Each module would probably be no longer than 25 mins and include animation, avatars, stories, scenarios, reflective questions and a quiz. Students would need to do no more than one module each week as homework, with the school digitally monitoring the progress of each pupil.

In the same way that the Khan Academy, a non-profit educational website, has revolutionised maths teaching for millions of students, delivering personal finance education online will help students to take more control over their learning and go at the pace which suits them. It would also free up teachers to deliver more in-depth workshops in school time.

My final suggestion, however, is the most radical. To give both an incentive and sanction for students and schools to engage with the personal finance course, students would be required to pass a simple assessment — a financial driving test — before any lending organisation, including the Student Loan Company, would be permitted to offer them any form of loan or borrowing facility. The obligation to pass the test would hold for all people reaching the age of 18 from an agreed start date.

Setting up such a financial driving test as a hurdle that must be cleared to access credit will ensure borrowers have a good understanding of the implications of taking on debt, hopefully leading to better financial decisions. It also gives a strong incentive for young people, their parents and schools to engage with the subject in a meaningful way. Without it there will be no university financing, no mortgage to buy a house and no credit card to be able to buy goods and services.

Perhaps surprisingly, the young people I have spoken to have responded favourably to these ideas. Rather than reject a proposal that involves them taking yet another test, they recognise the need for help in navigating the complex financial choices that life will, at some point, be sure to throw at them.

Jason Butler is an independent personal finance expert and former financial adviser; Twitter: @jbthewealthman

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