Professor Peter Davies: Assessing financial literacy in secondary schools

 

The University of Birmingham funded a small piece of exploratory research which was intended to follow up a framework for financial literacy, the point being to look at how financial literacy might be seen more broadly than just the consumer approach that is usual in much of the work on this subject.

We interviewed students in secondary schools, and this was to follow up an agenda - what did they really think about debt in the context, not just of themselves and their own futures, but in terms of government debt, and indeed in terms of what banks were doing about debt. A few of the things that emerged from that are first of all, that they really did put debt very much in the category that debt is bad. But there are other things like mortgages, notice the word, and they didn't call them debt. These are good things, and so they had a good and a bad pot and they used different words for anything that they put in the good pot. Now from the point of view of these students' futures, one of the interesting questions was which pot do they put loans for higher education in? Are they a bad pot debt, or a good pot something other than debt? Largely they put them in the good pot. But the way that they were thinking about good and bad didn't really bring maths into play at all. We didn't find any of them making mathematical calculations about whether debt was good or bad.

In principle they saw government debt as a bad thing, just as they saw the word debt as a bad thing for themselves. And they worried a lot about governments ability to repay debt and they thought about that very much in the same way that they thought about families having to repay debt, that is, they had no idea that governments could sell their debt to other people and that other people would buy debt. All of these things which greatly affect whether it makes sense for governments to take on debt or not, are a long way distant from their thinking. Now that's important if, when they are eighteen and above and they are voting about these things, their whole idea about important topics on which they are voting is really on a very flimsy basis, so a key part of this research is trying to understand just how differently students think about debt in different contexts, the conceptions that they have and what may help us in schools and beyond to help them to develop more appropriate, more sophisticated conceptions of debt in different contexts.

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