Episode 138: Financial Literacy - 5 Year olds learning mortgage rates?!

Andy Psarianos

Hi, I'm Andy Psarianos.

Robin Potter

Hi, I'm Robin Potter.

Adam Gifford

Hi, I'm Adam Gifford.

Andy Psarianos

This is the School of School Podcast.

Welcome to the School of School Podcast.

Adam Gifford

Welcome back to another School of School Podcast. I'm delighted to be joined by Robin and Andy. How are you both today?

Andy Psarianos

Hey, I'm good.

Robin Potter

Hey, I am too.

Adam Gifford

Good. Well, listen, this is a good start. We're all good, because I'm good too. I've been listening in the news, and I've been hearing some interesting stuff about the possible direction of travel of maths. There were some things that were said at the Labour Party Conference talking about mathematics, real world mathematics, those things. Something that jumped out to me, and I've subsequently talked to a couple of people about it, is this idea of financial literacy, and I've been asked, "Does that mean that if we're teaching children financial literacy, that we're teaching five-year-olds mortgage rates, and dialling into the Bank of England to see whether or not that's going to go up, down, or stay the same?" Do you think that was what was meant by financial literacy, and how does that even relate to what we do in maths anyway?

Andy Psarianos

Well, I'll jump in. No, I don't think that's what it means at all. I think anybody who thinks you can teach mortgage rates to a five-year-old is living in another universe, or comes from another planet. You can't. You can't. A lot of five-year-olds can't even add numbers to 10. That can't be what it is. I think that's the press-

Adam Gifford

Literally, what-

Andy Psarianos

... I that's rhetoric and it's the press spinning stuff.

Adam Gifford

What are they saying? What do you think, because I think that there is real merit in anyone. I think it's essential that we have financial literacy. But what do you think? How does that apply to what we do, the children in our school, and those things?

Andy Psarianos

Well, I mean, I think the reality is this is, you got to think about where this is coming from. If you look at how many people are in, I don't want to... Financial trouble, is that the right word? I don't know. Just don't seem to understand the ramifications of the financial decisions that they make. Now, is that because they don't understand it? Or is it because they choose to ignore it? Who knows? But the reality is, is that yeah, we probably don't prepare people well enough to deal with somewhat complex financial situations that they're going to encounter in their life. Mortgages is a good example, leases on cars and other things, credit cards. Geez, credit cards. How many people...

I remember before the 2018 financial recession, crash, whatever you want to call it, I remember reading in the newspaper one day, I just picked up a newspaper, I was on the tube in London, just picked a newspaper and it said something. It was ridiculous. I'll get the numbers wrong, but something like two thirds of the people with mortgages paid their mortgages with their credit cards more than once in the last year. Okay. The facts are wrong, but that's what they were talking about. How many people paid for their mortgages with their credit cards in the last year? Now look, if you're in a position where you're paying your mortgage with your credit card, that's pretty desperate. That's pretty desperate. Financially, that's pretty desperate.

Is it because people don't understand? I think that's the fear. The fear is that we haven't explained it or we haven't given people the mechanisms to understand the ramifications of the financial decisions that they make. And I think that's a responsible thing to teach people that. You can't teach it to five-year-olds. You don't need to teach it to five-year-olds. I think the responsible thing to do is say that people should know and understand this by the time they leave secondary school. That's a...

Do you need to start teaching to five-year-olds? Of course you do, in the sense that you need to teach them all the steps and building blocks so that by the time they leave secondary school they understand it. We teach all the things, I think, in a national curriculum, even in primary school, most of the mechanics of what they need to understand are taught in primary school already. We're just not making the link between that what they're learning and the financial decisions that they're making. And maybe we need to spend more time doing that, and I think that would be a really responsible thing to do actually.

Robin Potter

I was just going to say, and I think that just goes back to real world maths again.

Andy Psarianos

Absolutely.

Robin Potter

We're looking at it from... Adam's question was how can we, with the children that we work with, so primary age pupils, how can we help them to get to being understanding, being financially literate? And so those are the steps we need to put in place. And like you said, Andy, by the time we get to high school, then we need some better courses than what they have now on financial literacy so that they are prepared young adults when they leave and they aren't paying off their mortgage with their credit card. Simple as that.

Andy Psarianos

Yeah.

Adam Gifford

I think, yeah, and that's a really good point about that real world. And just following on from what's already been said, I think it's incumbent on us. We're in the business of making and writing materials that support learning, but for every teacher to really understand where the maths they're teaching applies and where it relates to in the world. And of course it's not one area, it's multiple areas. If you want to talk percentages, talk about, well, is it better in a sale if I buy two, I get 20% off? All of those sorts of things that make a tangible difference because all of that stuff will add up. All of that understanding to be fluent in that and just to be able to see it and make a really sound financial decision without getting too grandiose about it.

If it means that I can buy this today and that I'm going to buy it anyway, but I can save an extra five pounds, the value of that five pounds, I often think people might shrug their shoulders at doing a calculation at the time. But if I was to say, if I walked up to the same person and said, "Can I have five pounds? Can I just have five pounds out of your pocket?" Well, of course they'd say no, because that five pounds is quite important at that stage. I think people need to be able to converse with what's going on around them and make those decisions.

And I think also the importance of some of the decisions that are made, headline decisions. If we are talking about say, Bank of England rate, which most of us, mere mortals, we are not part of that decision making process. The implications are massive. At the very least, it would be nice to listen to a conversation that's going on around that, be it on the radio, be it part of something you read in the news, be it your colleagues or whatever. And at the very least, if I choose to be part of that conversation, I can be, as opposed to it being something that will forever in a day be, "Oh no, that's nothing to do with me. I can't access that. I'm alienated from that. That's not something I work in." And it comes back to making it absolutely normal to see the world, see mathematics in the world around us and have that constant conversation where it is just normal to have that. I think it's just so crucial.

Andy Psarianos

And I think people shy away from the complexity. Generally, they seem to be afraid. I think this is part of it's a fear of mathematics as a whole. When you start thinking about some of these decisions, it's like it's a denial thing. Part of it is not that they couldn't work it out if given a chance, it's just like, it's fear based. It's like, "I just going to deny this. I'm not going to think about this because I don't want..." It's more than just calculation problem, being able to calculate a problem. You see people are in denial.

I think the problem is a little bit deeper, and I think that we need to deal with that element as well. This sort of, let's say the softer bit of it, the psychological, the mindset about calculations and mathematics and the fear that sets into some people when they realise, "Oh, I'm going to have to really think about this," and then they shy away from it. I think we need to tackle that financial literacy on both ends because a lot of financial problems are actually quite complicated. Like you say, "Oh, should I make this investment?"

Well, okay, assume you've got a sum of money and you want to put it somewhere sensible. "Well, this looks like it might be more promising, but there's fees associated versus this other thing, which is, should I put it in the stock market? Should I invest in some other more secure... Oh, this one has fees associated." All those things, they're quite complex decisions that you need to make, and you have to deal with the risk factors and you have to deal with all the things that surround it. And I think most people just shy away from making those decisions. And then they just figure, "Well, I'll never be rich, is what they figure and, "I just going to pay with it with my credit card and not worry about it." I don't think it's that calculation problem.

Robin Potter

No, but again, it's setting them up for success. I mean, people shy away from it because they don't understand or they're not comfortable with maybe the maths of it. But if we're setting students up for success from a young age where they are more comfortable and they are prepared, then as an adult, you're less likely to not comprehend how these things impact your decisions financially.

Andy Psarianos

Yeah.

Adam Gifford

But I think it allows us to be part of that conversation, and I think that's the thing. Economists study for a long time to be an economist, an engineer. I'm just thinking, I'm looking around the house and let's say I want to have a job done. I don't need to know all of the tolerances if I was having steel beams put in, for example. But if the builder said to me, "Listen, it's going to add 50% onto the total bill and your labour costs will go up by 20%," I want to be at least in a position where I don't really need to know the cost of raw steel or the way that you're working all of this stuff out. All I need to know is if it's a hundred pounds, it's going to come 150 quid. Right, now I've got a decision to make. What are the labour costs? Okay.At the very least I can have that conversation rather than going, "Just do it. Just do it. It's all numbers. I don't know. Just do it." It leaves people really vulnerable.

And I was listening to something on the radio over the weekend when I was driving, and they're talking about the number of people that are getting scammed, these financial scams. And I know part of it's just eliciting information, but there might be other things where people are promised the world and is what you're being promised reasonable? Are people even in a position to do that? And I think that again, it's having that ability to, at the very least, converse and utilise those skills not in isolation. To be able to apply them and say, "Is this actually reasonable? Is this something that..." And I just keep coming back to that idea of being part of the conversation and not being alienated from it, which it is, we've spoken about many times before, starts really young, really young to be able to talk mathematically just about stuff that's going on around them.

Andy Psarianos

Absolutely. When do you think we do need to start? Because we started this conversation off with should you do it with five year olds.

Robin Potter

Five year olds.

Andy Psarianos

... five year olds? When should you start getting into some of the heavier aspects of financial literacy?

Adam Gifford

Well, I think like you said, you've got to go back to the skills. Even though we might be able to talk about some ideas that the children are living in the world, if you are working in percentages, for example, where there's a whole load of contexts that we can start to apply there, and perhaps we just need to be mindful that if we really want that financial literacy, what does it look like? Maybe the children have a savings account that's probably the biggest buy-in and connection that they might actually get some money back for doing nothing. Start with that concept. Is that money doing nothing?

And having those conversations and then getting to a stage where, how much money can I get for doing nothing? That in itself, is that a real idea? But that is quite an appealing end, isn't it? If I was a kid and someone said to me I can get some money for doing nothing, oh okay. How does that even work? Can I quantify that? Is that a real thing? And I think that wherever it's applicable, you see some cards that you can preload, credit cards and those sorts of things. And of course that's been accelerated because people aren't using cash anymore. Now the accessibility to what we would term a credit card, even though they're not really a credit card-

Andy Psarianos

Credit, yeah.

Adam Gifford

... the idea around that, or I think of things like you hear people buying stuff in game and not being able to pay it back, and then you've now got a cumulative interest on something. Even if they start to get the idea around those sorts of things, we could start to apply it, maybe simplify the numbers, just to get a sense of this is the reason why if your parents plug in your credit card, this is the reason why you don't go buying the stuff for your game while you are in it.

Andy Psarianos

That's right. Yeah. Yeah, I think that's the key thing is that we have to introduce the concepts with simple numbers, make it really... Because I think part of the problem is that when we start dealing with these concepts, we start dealing them with very complex problems and conceptually, I don't know, let's say compounding interest, which you just brought up. We know how to calculate that. And yeah, it requires a certain level of mathematical know-how, but there's no point in making that problem a lot more difficult by using really complex numbers. That doesn't help. You can illustrate the problem with very simple numbers, all numbers under 10. You can illustrate the problem very quickly, and maybe that's where we can start a little bit in primary school is showing this concept of exponential growth. Even though we're not really dealing with that mathematics later, the concept can be introduced earlier on.

The idea that some things grow faster than in a straight line because actually, the real world, pretty much all of it operates that way. It's easy to show because the world doesn't work in linear fashion, it's mostly exponents. You can introduce those concepts. There's so many examples where you can introduce those things. We should probably, but I think the large burden really falls on the content creators and the teachers, again, to just one, not create a mindset of fear in mathematics. And I think the way you create a mindset of fear of mathematics is making it way too difficult, way too quickly. That doesn't help because I think that that's always where people drop off. And to make sure that we introduce those contexts early on with simple examples so that we can build on a little bit later.

Robin Potter

Like gaming, that's actually an excellent one-

Andy Psarianos

Yeah, that's a great example.

Robin Potter

... because I've thought of so many times, I know friends of mine whose kids racked up all kinds of money buying whatever it is for their game-

Andy Psarianos

Swords or whatever. Yeah.

Robin Potter

Yeah, yeah. And I think kids would get that. It's a perfect example. They might get that, "Oh yeah, that costs money."

Adam Gifford

Yeah, totally. And I think the other thing too, just following on from Andy said before about simplifying things, I think it was John Dewey who was talking about using informal language to describe a formal idea. That is so essential because like we've been talking about, to me, the first thing is making that link that something's mathematical that we can talk about and we don't need to use flash maths language or anything to describe the idea of why is it a bad idea when your parents put their credit card in and you just keep doing this? Yeah, because every one costs two pounds. Yeah, two pounds, is that a massive amount? Well, no, not really. But what if you do it a hundred times? What if you click a hundred times? Now what's happened? Are your parents going to be really happy with you or are they going to be really crossed with you? Why? Can you imagine the level of crossness? At what point does it... And you could start to develop it that way.

Andy Psarianos

It's a new unit of measure, introduced by Adam.

Adam Gifford

Exactly. But why not?

Andy Psarianos

Level of crossness.

Adam Gifford

Why not? Because at the very end, we can quantify it if we needed to. And that's where the math, if you like, the written, the abstract, if you like, the real maths comes in because up until then we're just talking about upsetting parents, which is fine because that works and it gives everyone in to develop that idea. And I think that's something that the lens that we look through, the conversations that we're having as educators, that should be how we see the world as well. These things just exist and don't get too hung up in the initial stages about coming up with a big vocab list or something like that initially. I think it's developing the idea that these things exist, but to make it easier, we could come up with a formula for crossness. "If I push the button 40 times, that's the threshold, man. 80 pounds, that's what I know I've got in my bank, beyond what I can pay back. I'm in real trouble. I'm in big, big trouble." Yeah.

Robin Potter

And that's a great story to share. It's going back to real world and telling a story with it, and kids will remember that. They'll get that. Yeah.

Andy Psarianos

Absolutely, they will Yeah.

Robin Potter

Why not?

Andy Psarianos

Thank you for joining us on the School of School Podcast.