Children's Society: schools should give kids savings accounts

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"A sound education on debt and money management may help to prevent young people getting into debt when they become young adults," the two charities said in 'The Debt Trap', which looks at the impact of debt on children.

88% of parents surveyed as part of the report agreed that schools should teach children more about debt and money management.

The charities say that effective financial education could counter the dangerous effects of credit advertising, the average child saw 70 payday adverts in 2012, according to Ofcom research; make young people better equipped to manage their money and, crucially, "minimise the isolation that children in families in problem debt feel".

More specifically, they also recommend that schools help children to get into the saving habit by setting them up with savings accounts from local credit unions.

Credit union accounts for kids

Campaigners argue that giving children credit union savings accounts is a practical, motivating way to teach them about money.

Some areas have already got started.

Haringey and Glasgow councils announced earlier this year that they will give each child going into year seven in September a savings account with a local credit union, and a bit of cash (£20 in London, £10 in Scotland) to start them off.

The council says it hopes schools will talk about the accounts as part of their financial education classes which, as of September, are a required part of the secondary Citizenship curriculum.

Like the authors of today's report, supporters emphasise the long term effects of the schemes.

"It is so important to get children to learn the savings habit," said Martin Groombridge, manager of London Capital Credit Union.

"This initiative is a welcome way of promoting saving as a way of avoiding debt problems in later life."

Fear of debt drives financial education

Both Glasgow and Haringey councils specifically cited an increase in problem debt arising from high cost short term lenders as a key driver for them setting up their savings programmes.

Similarly, 'The Debt Trap' says that we need better financial education "to explain to children the dangers of credit... give children an understanding of effective routes out of problem debt without recourse to further borrowing [and] help build financial resilience through savings."

This was also an argument made many times as MPs debated putting financial education into the curriculum in the first place.

"[With more financial education] people will be less in thrall to doorstep lenders and those who can bamboozle them with what interest rates and payments are," said Iain Duncan Smith, during a parliamentary debate on the subject.

The impact of education

A Money Advice Service study released last year found, like many other studies, that most children turn first to their parents for financial advice.

Today's report suggests that, among many other problems, children who come from households struggling with problem debt could do with some extra help learning to manage their money.

However, there is little support for the argument that school based financial education is the best way to provide that help.

Longitudinal studies have found very little evidence that greater financial capability achieved through personal finance classes has stopped people from struggling with money problems later in life.

In terms of actual outcomes, few researchers have found that knowing more about personal finance makes a big difference.

Innovative ways of teaching, like giving kids credit union accounts, might change that. But claims that education can reduce personal debt are a big leap.

The Money Advice Service's study found that young people from families who struggle to pay the bills were less confident about their ability to manage money. But the chance of them saving regularly were about the same as households that didn't struggle.