04/06/2013 09:59 BST | Updated 29/07/2013 06:12 BST

Financial Education Won't Solve Our Problems

Increasing our level of education is appealing on so many levels and fundamental to all of them is the thought that, while banks and economic trends are hard to tame, we can still move towards better financial wellbeing for everyone, one student at a time.

From September 2014, financial education will be a compulsory part of the national curriculum for 11 to 18 year olds.

Campaigners battled hard to get classes in cash into schools but now it's time to fight the war: creating effective education that will really benefit its recipients for years to come.

Do classes in cash work?

Part of that battle will be defining that word 'benefit'.

Moneysavingexpert's Martin Lewis spoke for many supporters when he noted in February that, "education is a cheap and easy way to fix the problem [of financial illiteracy]."

Lack of knowledge is "one of the causes of our current economic crisis and a huge contributor to continued mis-selling epidemics," Lewis said.

Yet evidence that help in school could have significantly mitigated either of those is lacking.

Just ask Lewis Mandell: in five surveys between 2001 and 2009, the - now former - head researcher for personal finance education group the Jumpstart Coalition found no significant difference in financial literacy between those who had taken a class for at least a term, and those who hadn't.

Even supportive evidence is sometimes troubling.

A more recent study (Cole 2013) found that while personal finance courses had no effect on subsequent behavior, an additional maths course in high school reduced "the probability of being delinquent on credit card debt, declaring bankruptcy or experiencing foreclosure."

Other studies have found positive links between literacy and financial wellbeing even controlling for schooling (Behrman 2010) and sociodemographic factors (Lusardi and Mitchell 2006), through neither can explain how this literacy is acquired.

Mandell has suggested that, rather than product information, "the most valuable part of [financial] education is an appeal to the student's emotions regarding the need for savings, the consequences of excessive debt, etc." It's hardly a ringing endorsement.

As Lauren Willis and others have pointed out, financial education has a broad political appeal: for the right, it's sending a strong, pro-business message of self-reliance; for the left, it's empowering increasingly embattled consumers.

However, ideas this vague generally start to degenerate on contact with reality. And financial education faces a harsher reality than most.

Struggling consumers

Average earnings in the UK have been falling in real terms since 2009.

As Helaine Olen, author of Pound Foolish, which has an invaluable chapter on the US experience of financial education, said recently, "If there is a class in how to fix this one, sign me up."

A 2011 survey from StepChange - the advice charity then known as the Consumer Credit Counselling Service (CCCS) - showed that 48% of CCCS clients fell into debt after they lost their job or their pay was cut.

To suggest, as someone on this site did recently that "those that don't grab [financial education] will only have themselves to blame" is to seriously underestimate the effect of a big financial shock.

Beneficial or not, financial education won't prevent households struggling for money as a result of factors largely out of their control.

(Really) false friends

Finally, although personal finance education received widespread public support before it became a statutory part of the curriculum, it's worth remembering it was financial institutions including our big four banks that really pushed it forward.

That these businesses don't support financial education purely out of the goodness of their hearts is no surprise - they are businesses, after all - and it's not necessarily cause for alarm - even Goldman branded worksheets (were such a thing to exist) wouldn't tell kids to go get a subprime mortgage.

What is troubling, however, is that banks are pushing education as a reasonable alternative to being more reasonable, clear and responsible towards consumers.

As a February 2012 Financial Services Consumer Panel briefing paper put it, "firms will always have more information, capability and resource at their disposal than the consumers they interact with."

The thought that financial education could have prevented the PPI crisis, for example, is laughable.

Many of those who took out that product made a good decision, based on the information they had available. The problem was that the information on offer was highly, endemically, misleading.

To mesh well with the Citizenship curriculum, personal finance's new home, it's likely that UK students will talk about issues like this.

But even effective education programs can only combat nefariousness on this level to some degree: who knows what the next crisis will be?

The financial life you can save

It's great that personal finance education will now be statutory.

Some form of personal finance education has been a non-statutory part of the curriculum since the 80s and charities like PFEG (the Personal Finance Education Group) have been offering schools support and resources for a long time.

But that set up has meant patchy coverage and it's been hard to measure the benefits. PFEG's Take Charge initiative is currently mapping projects they're involved in but, they told me, there's no standardized method for measuring effectiveness.

With statutory classes and personal finance tests in the form of Citizenship GCSEs and A levels we will at least be (somewhat) on the same page.

Increasing our level of education is appealing on so many levels and fundamental to all of them is the thought that, while banks and economic trends are hard to tame, we can still move towards better financial wellbeing for everyone, one student at a time.

In the process of zeroing in on individuals, however, let's not forget that the water we're all swimming in increasingly necessitates decisions with no right answer.

Teaching kids to swim is great. But let's clean up the water too.