Is the way we manage money determined by financial education?

by on September 9th, 2013

With the Government recently announcing the introduction of financial education into the national curriculum, there’s been a lot of debate in the news about teaching children how to manage money. It made me wonder whether the way we manage money is determined by the level of financial education we have had.

What are the differences in the way we manage our money?

If we take my group of friends as an example we are all of a similar age – but the way we manage our money is poles apart.

I’m the financially sensible one; I have savings, I think about my financial future and I’m constantly worried about how spending that extra £20 will impact my finances in the last week of the month.  I think about mortgages, pensions and life assurance. I don’t have an overdraft, loan or credit card and I carefully plan a monthly budget and stick to it no matter how many times they try and coerce me into that night out, city-break or last minute holiday.

On the other hand, I have a friend who is the complete opposite. We are exactly the same age, give or take a month and we’ve had a similar upbringing, education and we’re on the same salary. Yet she’s the first to book that last minute holiday, spend a fortune on new clothes every week and lives on an overdraft and 0% credit card. Planning for her financial future is the last thing on her mind.

Both attitudes are extreme, my generation seem to be either financially anxious or financially fickle –  what we need is to find a middle ground. Can educating children solve the problem and produce a new generation who are financially confident?

Is financial education the solution to money management?

Teaching children about managing money is a sensible idea. But from my experiences it’s not what you know that determines how you’ll manage your money. Ignorance is not the problem.

I’d hope that learning about ISAs, interest rates and bonds at the age of 11 will make a lasting impression on the financial future of children, but I’m sceptical.

There will always be the spender in a group of friends, as there will always be the saver.

Money management is determined by personal experience, circumstance and personality. It is as much a part of growing up as starting your first day of school, your first holiday with your friends or graduating from university.

No matter how carefully you plan – life gets in the way. It’s about how you adapt that determines how effectively you can manage your money, and no amount of text book theory will prepare you for that.