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CASH IN HAND

12-09-2007

With Britain drowning in a sea of credit, Lynn Hawthorne muses on plans to bring financial education into the classroom. Is it time to just bring back the old-fashioned piggy bank?

Ministers announced the other day that children as young as five will learn how to open a bank account and manage their money in Maths lessons. They will also be taught about interest rates and investment banking in a government drive to wipe out debt problems in later life.

This is linked to the fact that the first five year-olds to benefit from the Government's Child Trust Fund start school this month, although critics suggest that the impact will not be felt until 2020, when these children reach 18.

The package to educate children in primary and secondary schools will cost around 11.5 million.

Interesting! When I was at primary school in the late 60s/early 70s, the local branch of the Trustees Savings Bank came into school on a weekly basis to collect our savings.

Our books were updated manually and we could see the total of our 'investment' accruing before our eyes. Twice a year, the books were collected and taken to the bank and interest was added.

This was explained when the books were returned and we understood that if we saved regularly, our pocket money could earn us more money so that we could buy bigger, better things or we would have some money for when we were older.

Of course, in these days of computerised systems and online banking, collecting pocket money from kids - where there would be human interaction - is abhorrent to global organisations used to dealing with multi-millions.

I have lamented the loss of personal, face-to-face banking before on The Stirrer, but this latest move proves my point. When kids are out of school, banks and building societies are closed, so they don't have the satisfaction of making a personal contribution.

It is undeniable that we have lost the sense of the value of money. When I had my first property 25 years ago, my husband was still paid weekly in cash. I organised this money in empty jam jars into mortgage, bills, food, savings and spending, if there was ever anything left!

The only debt we had was the mortgage, which is acceptable.

This sounds archaic, but it was manageable. As soon as salary was paid directly into the bank on a monthly basis and we had a credit card, I felt we lost control and we got into debt. Not a huge amount (in fact, we went to the bank for a chat about it and they said, incredulously: "Is that all? You should see the mess some of our clients are in."), but enough to make us reconsider our spending.

We'drew in our horns' and paid off the debt over a period of time and now keep a much more careful eye on what we spend.

We could do that because of the experience we had when we were younger. Neither of us came from affluent families and we understood the value of money.

But with Britain having one of the highest costs of living in Europe and property prices so high that 35-year mortgages at six-times salary are being offered, we as a society are in danger of drowning in debt.

Is anyone to blame? It's hard to point the finger.

Surely parents have a responsibility to teach their children, but can they manage their own finances? We know there are people who take out a loan for a holiday, take a year to pay it off and then start again the next year. Isn't that the point of saving? I was told of a nine year-old recently who claims he has 20 pocket money per week and phones out for pizza and takeaways!

I know of someone else that took on a mortgage based on joint income. When his partner left him, he could no longer afford the full amount alone, so he told his building society.

They didn't listen, he got into arrears and they took him to court. He explained again and their solution was to put his arrears on top of his monthly payment. The result was repossession.

Our financial institutions must take more care with the amounts they lend and to whom if they are not to lead people into financial distress.

But ultimately, we are to blame. We need to handle our money with respect and prioritise appropriately. Everyone loves a bit of retail therapy or the thought of a holiday in the sun, but these expenditures mustn't be in place of our financial commitments.

The mortgage or the rent must come first, as some tenants are being reminded currently. If we don't keep the roof over our heads, we're in deep trouble. Maybe if these expenses were deducted at the point of payment of salary or benefits, then we would not be tempted to spend money we do not have. We would only have to manage the residue.

Perhaps it is time to go back to the piggy bank jars and set up savings for specific goals. Perhaps our children, fresh from this new education initiative, can advise us on how to handle our cash.

And if the Beano or teenage mags start being replaced by The Financial Times in your household, you may just have spawned a future Gordon Gecko.

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