Thursday, 26 May 2011
Take the Money and Run
I do think financial education is terribly important - don't you?
Teach the little kiddiwinks how to amortise their weekly pocket money and learn to calculate the net present value of all their Christmas gifts over 20 years; these are skills that will ensure they don't end up in the same financial hole many of their parents and grandparents find themselves.
One of the great failures of my career was not succeeding in getting financial literacy in the national curriculum (it's in now).
I was told by an extremely erudite pen pusher from the Department of MisEducation that teachers had enough difficulty teaching the then existing span of the national curriculum without adding another, albeit, worthy skill, to their burden. Something like: "They should first look to their parents for such instruction", was the response!
That was in the age of the lotus eaters, when everyone believed that banks wouldn't lend frivolously; so those 7 credit cards and 120% mortgages were quite manageable; and indeed a badge of adulthood.
It is, therefore, a joy to see that my bank, the Halifax, is doing its bit to improve its customers' financial skills, in a real world, practical way. Actually their approach is quite novel.
First is an exercise in counting. About this time of year they send out a flurry of letters. The first informs you that you have an ISA, just in case you'd forgotten, but nothing else. Included with this piece of intelligence is a ton of redrafted terms and conditions usually numbering well over a 100 clauses, giving you ample opportunity to test your counting skills. The second communique informs you of the money you've earned on your ISA since the start of a previous financial year.
Here the exercise is about compound interest and understanding interest rates. The really clever thing is that they (deliberately) leave out the interest rate your ISA savings is attracting. Initially I thought this was because they were too embarrassed to print in black and white the derisory rate you receive. However, on reflection I realised it's so you can test your financial skills and using the information provided, the opening and closing balances and the time period, you are able to discover for yourself how much they rip you off.
I think this is hugely empowering, don't you?
What this means is that once you have carried out this simple calculation you will no longer sign up to a new credit or store card, or take out a loan at inflated rates, thus saving yourself years of anguish and debt, if not eviction, divorce and penury .
Why? Because on seeing that the interest rate you'll have to pay on their prettily designed card is a mere17%, you will immediately fly into an uncontrollable rage knowing that your hard earned savings are getting a paltry 2%, if you're lucky, and smack in the gob the bank's cocky, wet behind the ears, juvenile financial advisor, stuffing the credit agreement form as far up his PPI as the High Court will allow.
Well done Halifax!