It Adds Up to Teaching Finance; PERSONAL FINANCE

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The collapse of Christmas club company Farepak and the loss of millions of pounds for its 150,000 low-income customers has prompted renewed calls for finance to feature in our school curriculum.

Basic lessons in finance given in our schools would teach pupils that banks provide a straightforward way of saving money.

The money entrusted to the Swindon-based company was a form of saving, and, yes, customers could have put it in the bank instead. But the reality is not that simple.

You have to remember that many of those who chose Farepak as a way of saving for Christmas may well have lacked the discipline to make effective use of a bank account. They are vulnerable and what were the odds against them getting their money out again from a bank account when a financial problem looms?

The money handed over by Farepak customers should have been ring-fenced in a segregated fund not accessible to the company.

No one entrusting a company with their money in a savings role should lose the sums they have handed over in good faith.

We are not talking about investing in stocks and shares where your money can vanish in the face of severe market fluctuations.

The obvious answer is that the Financial Services Authority should regulate companies such as Farepak on the grounds that they are providing a form of saving and these customers need protecting.

Putting aside this example of a financial nightmare, the case for providing finance lessons in our schools is overwhelming, as I argued in a column earlier this year.

As I pointed out, our total credit card debt at the end of 2005 was estimated at pounds 56.35 billion with UK consumers accounting for twothirds of the total for the European Union.

The bombardment of the young with credit cards is even more disturbing when you find a survey revealing that nine out of ten credit borrowers were issued with cards without the lender bothering to check whether they were capable of repaying the money they were borrowing.

In an age when debt is no longer considered something to be avoided, it is doubtful the average person off the top of his head could list how much of his income is disappearing just through repaying his debts and direct debit arrangements each month.

A study by the Institute of Public Policy Research (IPPR) has claimed that an average couple with two kids have lost around pounds 32,000 due to bad financial decisions by the time they reach middle age.

It is not hard to stumble across startling examples of financial ignorance even among professionals who you would assume have a reasonable knowledge of the basics of finance. …