“In examinations those who do not wish to know ask questions of those who cannot tell.”
Walter Raleigh
The news last week from UK Finance, that personal deposits grew by just 1.2% over the past year - the lowest level since they started recording in 2007, drew a sharp contrast with the stated objective of the Child Trust Fund, about to celebrate its 16th birthday, which is to ‘establish a savings habit among children, providing a cushion of financial assets as they embark on adult life’.
Meanwhile GCSE results result released last Thursday confirmed the push towards the sciences that we saw the previous week in ‘A’ levels, but offered nothing in the form of financial education.
UK Finance is the umbrella trade organisation which embraces the Asset-based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK, and the UK Cards Association. Its regular updates are therefore authoritative, and show people having to dig further into their long-term savings and place more of their money in instant access accounts to meet their outgoings.
We may not be in as bad a situation as in Italy and Greece, but we remain a heavily indebted country. National and personal debts are too high, and it is tragic to see a new generation leaving university burdened with heavy student debt, right from the start of their working lives.
Meanwhile teachers have so little confidence in their own finances that they are generally unable to teach financial awareness. The lack of any mainstream GCSE examination bearing the word ‘finance’ confirms that, if you don’t test knowledge in a subject, how can you be confident that it’s being taught? And it really is wholly inadequate to suggest that finance can be included in Mathematics.
We should indeed be pleased that the GCSE results show science becoming more widely taken, and it is excellent news that the new ‘Food Preparation & Nutrition’ GCSE has proved to be so popular in its first year. We’ve analysed the full results from the Joint Council for Qualifications in order to show the movements in the numbers of exams taken since 2017 and, in general, the trends are encouraging - but not for finance.
And that’s why the Child Trust Fund has such an important role to play. The Share Foundation assessed the current status of the scheme last week, as the oldest recipients approach their 16th birthday on 1st September: it’s an interesting picture, with three distinct demographic segments.
The wealthy have made the greatest use of the account, as many suspected that they would. Additional subscriptions have been made by family/friends, and the average value is nearly £4,000: starting from an average Government contribution of £250, boosted by those extra subscriptions and investment growth. The challenge in this segment now is to hand over control of the account to the young person as they reach 16, and to build financial awareness first hand.
For the middle demographic of c. 4 million accounts, the Government contribution averaged c. £500 - and they’ve seen a limited increase from additional contributions and investment growth. Over 1 million Child Trust Funds were opened as cash accounts, and these will have featured significantly in this demographic. So their average value is just under £1,000, and about one in every six accounts is ‘Addressee Gone Away’, or lost. If Child Trust Funds are to generate financial awareness for this group, a lot of work will need to be done throughout the secondary school network.
Then there’s the most disadvantaged: those in receipt of Child Tax Credit. Here the ‘Addressee Gone Away’ rate has risen to an appallingly high 37% and, because Government contributions were that much greater, their average value is c. £1,600. So for these 440,000 children with lost accounts there is now nearly £0.75 billion of value heading for dormancy unless these accounts are found. This really calls for Government action, and The Share Foundation has proposed an incentivised learning programme: not only to find the missing accounts, but also to provide real financial awareness engagement with these young people.
Somehow we’ve got to reach the position where we can focus on the needs of young people in addition to those of Brexit. It’s clearly not easy, but we cannot just leave vast quantities of debt, and virtually no financial training or experience to deal with it, for the next generation - especially when we have an account already in existence in the form of the Child Trust Fund, ready to do its bit. Let’s wake it up and, while we’re about it, let’s have a ‘Financial Awareness’ GCSE to match ‘Food Preparation & Nutrition’.
Gavin Oldham
Share Radio