Why Banking & Finance should be universally taught at school

In March 2016, a survey was conducted in United States by RBC Wealth Management-U.S. and City National Bank. The poser was that whether financial literacy is an important-enough skill that it should be taught alongside reading, writing and arithmetic ?  It was found that 87 percent of Americans believe that financial literacy should be taught in schools. Of those in favor of incorporating financial literacy into the classroom, 15 percent said instruction should begin as early as elementary. The rest (72 percent) said it should be taught in middle and high school.

In the last 3 - 4 years, concerted attempts have been made the world over, to include financial literacy at the High School level. In India, CBSE issued guidelines in October 2015, to all its affiliated schools to expose students to financial literacy and develop their capabilities through a project called School Bank Champs.. The project envisages interaction with bank authorities, exposure to opening of own bank account/ obtain debit cards/ net banking etc. 

The steps being taken now are little too late, little too slow and little too less. As a Banking professional I have interacted with hundreds of MBA grads and I have no hesitation in admitting my profound shock over their poor level of understanding of practical aspects of Banking. Our education system does not expose even the so called finance specialists to the science and art of finance and banking, so what can be said about graduates from other streams of science, engineering, medicine, architecture, hospitality, computers etc etc.

There is an appalling lack of understanding of concepts of money, finance and banking even though money lies at the crux of every life activity. Wherever you are and whatever you are doing- a doctor , engineer, architect, Government job, Private sector job, hospitality, own establishment or whatever - prime target is earning money and so little we educate our children about finance and banking.

At the school level most of us have been taught Maths, Physics, Chemistry, Life Sciences, Languages etc but nothing about managing money. So we are taught and trained to acquire skills which are beneficial to the environment around us ie our employers but we are not being exposed to monetary skills which affect our own well being. There is an imperative need to educate children about finance and banking - about concept of money, functioning of banking system, saving habits and saving instruments like mutual funds and insurance, investments and managing personal debt.

It is not a surprise that students coming out of schools, miss out on some of the most important techniques and skills required for leading a satisfactory life - understanding of numbers, cause and effect of various aspects of money , revenue generation , accounting , money evaluation through key performance indicators etc.

So why not expose students as early as VIIIth grade, to money basics, to banking basics and to basic debt management. This shall help them in not only performing better in whatever career roles they adopt but more importantly they will be able to take care of their own finances and avoid any monetary crisis in life, arising out of ignorance. If future generations have to be enabled to lead a satisfactory and fulfilling life, then its essential to educate them about finance, to equip them with monetary knowledge and skills so that they can make informed decisions in their lives. As somebody has put very aptly "Financial education fosters financial stability for individuals, families and entire communities."

Today youth graduating from Colleges may be well versed in their own stream of education viz engineering or medicine etc but they are quite unprepared for the biggest challenge of their lives ie how to face financial realities and tackle them , simply because nobody has exposed them to basic finance and banking knowledge at school level. Students need personal finance classes, according to Prevost and other personal finance experts, to prevent them from spiraling into a life of debt and financial insecurity.

Most experts agree that earlier the children learn about money, the better. After establishing the dire need for introduction of basic finance and banking education at school level, let us deal with the issue of how to go about it. In my opinion, basic issues can be categorized as under  -

(i) Whom to teach - 

One of the most important factor in this learning exercise is to decide that at what age should we expose students to basic finance and banking knowledge and is there a need to  progressively upgrade the knowledge base, till the time a student leaves the school. There is no doubt that we need to start young but there shall not be an information overload and the child should be able to comprehend and absorb the technicalities. Although we may start as early as VIIIth grade, but I think XIth grade is most suited to start familiarizing children with money concepts. At this age they would be able to grasp the concepts as well as thoroughly understand the importance of this learning for their adult lives. .

(ii) What to teach - 

Finance and Banking are very wide fields with varied sub segments. There is absolutely no need to expose students to the entire gamut oif finance and banking skills  Idea is not to make them experts, but to expose them to basic concepts and practical applications. .

According to a Bank of America poll, 42% of adults are put off by the sheer amount of information available about financial issues and 28% believe it is difficult to learn about personal finance because amid so many choices they don’t know where to turn. We are suffocating under too much choice, which leads to inaction. 

We may expose the students to knowledge and skills covering the following parameters, leading to understanding of   -

(a)     Concept of money and how it can satisfy our basic needs as distinguished from wants

(b)     That whatever career / vocation they adopt in life, development of basic money calculation skills are imperative and expose them to such skills

(c)      How a bank operates and what products does it offer

(d)    Concept of interest and compounding of interest in the context of banking - how compound interest can be earned and how to avoid payment of the same

(e)    Concept of raising resources through equity or debt and how to deploy resources, whether in fixed assets or liquid assets

(f)      Concept of budgeting and spending within the budget

(g)    Concept of investment for optimizing returns, whether in stock market or real estate or liquid assets like Gold

(h)     Importance of strategizing and planning for success of any business model

The above list can be expanded or pruned depending on student’s interest and requirements.

(iii) How to teach - 

Teaching should not be bookish but related to practical skills. So although classroom teaching is unavoidable for exposure to concepts, but to make the students understand banking much better, a bank lab may be required, just like a physics or chemistry lab. It may not be an elaborate affair but a small and simple set up to enable understanding of a bank’s working. This should be topped up with establishment of Finance or Bankers Clubs. The clubs may become a platform for discussions on current finance / banking issues, which shall enable students to  connect with the environment.

(iv) Who may teach - 

I am fully convinced that it is necessary to start teaching finance and banking at school level, but the existing teaching staff may not be equipped to handle the onerous task. The core curriculum prescribed by Governments / Education Boards remains the prime concern of schools / teachers and it shall be too much to train the teachers first so that they can in turn teach finance and banking. I doubt whether the existing teaching staff in commerce stream would be equipped to handle practical aspects of finance and banking .

Answer may lie in retired bankers who may have flair for teaching. An average banker spends about 35 years in a Bank job , covering a large gamut of Banking services during his or her tenure. A large number of them are walking encyclopedias of Banking, and even if they are not updated about certain aspects of Finance / Banking their grounding would help in updating their skills much faster. These retired Bankers have practiced Banking for long years and are best suited to pass on the legacy to young minds.

It may be possible to spare 60 minutes per week for 25 weeks which can cover all practical aspects of Finance and Banking in a highly organized and structured manner. To those who may argue that why put additional burden on kids who may already be facing a heavy curriculum, my submission is that looking to the immense benefits of financial education, through their lives, it is a cost worth paying and may be more worthy of their time than studying some of the core curriculum which does not have any practical usage.

I may conclude by submitting that everybody should be educated to understand money matters, and the best time is to catch them in grade XIth, if not earlier.