As we climb out of the economic depression, the focus is increasingly on how our economies are recovering and moving out of the red into the black.
Despite the good news that employment is increasing, even though youth unemployment remains stubbornly three times the headline rate, the bad news is that productivity growth is slowing down on a global scale.
This means government and private debt will be hard to reduce. Businesses will feel the crunch from low productivity as this is fundamental to sustained economic growth.
This is where education comes in. The link between the two is gaining recognition and attention from policy makers, as we start to realise that the goals of these two entities are far more linked than previously thought.
The point of education is to prepare young people for the world of work; to finish school, colleges or university ready to join or set up companies that are essential to the economy. Education works to create the staff, entrepreneurs and CEOs of the future.
Research has shown that employers today find it difficult to hire entry-level staff with key skills such as resilience and problem solving [1]. This isn’t just about businesses struggling to hire gritty young individuals, but about a wider problem that will impact on the economy as growth continues to fall.
This means that education is not just vital for business, but for the economy as a whole. Young people need to have the financial skills and awareness to remain in control of their decisions and lives as they grow up in an increasingly complex world. Ensuring that they have the skills to succeed in a tough global economy will help them to make informed decisions as adults.
As the cost of living rises, the need to make informed financial decisions comes at an increasingly early age. Benefitting the UK economy by ensuring young people have the necessary skills will also ensure they are equipped to manage their personal finances well. House prices are on the up, as are rental costs, higher education and the general cost of living.
The youth are starting to change
Research by the Money Advice Service has found that adult money habits can be formed by the age of seven [2]. Therefore schools, colleges, universities and the teachers and tutors working with young people must have the support and budgets to effectively deliver financial education.
This is how we can tackle low productivity growth; by unlocking the potential of young people and creating an engagement with financial behaviour and habit. Financial education improves confidence, business acumen and creativity, teaching young people how to be productive and entrepreneurial employees, and more savvy spenders. This can help to generate the jobs we need to halt the decline in living standards that derives from low productivity growth, by creating better skilled, ambitious, motivated workers graduating from our schools, colleges and universities.
Paying the cost to be a boss
So what actually needs to be done? 70 percent of teachers reported that their pupils are encountering “money and financial decisions” earlier than they used to [3], while 60 percent of UK adults believe that managing money is more difficult now than it was ten years ago [4]. If education programmes are not in place to support this, the UK’s economy clearly faces a challenge.
One active practice of financial education is the Fiver Challenge, run by Young Enterprise and supported by Virgin Money. This is a scheme that pledges five to eleven-year olds with £5, challenging them to start a mini-business either with friends or on their own for one month.
Financial education, if delivered in those crucial early years, introduces young people to managing money, budgeting and understanding the role of money in life. It also enables them to develop the confidence to make wise financial decisions and consider their attitudes towards work and money.
The final countdown
Education is a business issue, and the need for financial education is central to the UK having a successful economy. Once firmly embedded into the education system, it can produce the creative, productive, driven and educated workforce the business world needs to drive the economy.
Both educators and businesses must be aware of their own place within the economic ecosystem and how much the financial landscape will benefit from schemes such as Fiver which focus on fostering financial and money handling skills.
[1] Young Enterprise and Citi Foundation Opinium Research of 418 senior managers in the UK, Spain, France and Germany, 2014.
[2] ‘Habit Formation and Learning in Young Children’, Money Advice Service and the University of Cambridge, May 2013
[3] pfeg survey of 770 teachers, June 2014
[4] Research carried out by ING for pfeg, December 2013
Michael Mercieca was appointed Chief Executive of Young Enterprise in April 2012. He has overseen a period of financial and operational growth including in September 2014, the merger of the Personal Finance Education Group (pfeg) into Young Enterprise. He was previously Director of Finance & Operations at The Prince's Trust which he joined in 2003, with responsibility for Finance, Corporate Support Services, Programme Design and operations in Scotland, Wales and Northern Ireland.
