I was about to start writing an outline for the new Financial Education programme that I will deliver in Scotland with my colleagues from Speakersbank  sponsored by a major global bank when an e-mail from the CIPD ( the UK  body for HR professionals)   arrived in my inbox  which lead me to this ( incredibly detailed) article  about why HR people need to understand the financial side of the business they are in.

It got me thinking about what levels of financial literacy we need.

Lets think about the basics

The training I am preparing is aimed at young people in school. The English and Scottish school curriculums are different but I think ( hope) that their aims to develop knowledge of money and how to manage it – personally and from a business perspective – are similar. The Scottish Curriculum for Excellence outlines stages under the heading of “Money” which sits under the main heading of Maths starting at early years in recognising what money looks like and is for through to being able to compare financial products and make informed choices. Our training –  over one school day-  will be aimed at speaking about issues like comparing costs when making buying decisions, the costs and benefits of using bank cards and considering savings and credit.

When working with youngsters on this topic recently I was encouraged by how much they knew about money and related this to their own spending habits. The media coverage of the banking crisis clearly had had an impact on their knowledge ( and views ) on what banks do. But when I spoke about this more generally I was struck by how many people were surprised that it needed to be taught in school and when I questioned where they learned about money the usual answer is from their parents. Now I hate to have to say this – but sometimes, in some areas , doing what our parents did is not necessarily a good thing!  But knowing what to do with your first salary payment when you leave school can be really helpful in preventing some of the financial disasters that lurk out there.

Then the obligations

Then there is understanding your financial obligations regarding outgoings about which you have no choice. I spent many years as a tax consultant specialising in personal tax. The UK income tax system is very very complicated ( is there a simple tax system anywhere?) but the basics are that everyone has an allowance up to which no tax is due. For employees, that allowance is divided into 12 monthly chunks and is allocated against the income for that month before tax is charged. National Insurance Contributions are also due on income between certain levels. I have lost count of the times when people tell me they were surprised ( shocked actually) how much tax they had to pay when they started work and can only assume that they did not learn this at school. That needs to be addressed too and I am sure that it will be.

Finally finance in relation to business

One of the sections on the Money part of the Scottish Curriculum though is ” I can use the terms profit and loss in buying and selling activities  and can make simple calculations for this” and I think this leads neatly into what they CIPD article talks about. This is  aimed at “decision maker” level HR professionals  and I liked the comment from Vanessa Robinson  when she said “A big part of business is making sure that the books add up. Not being able to do that means it’s harder for you to connect and converse with the people you are working with.” . Absolutely.
I believe though  that any employee at whatever level  who has a clearer idea of how businesses work have an advantage in that they can  understand the issues that affect their own business.  For example an employee who feels unhappy with their current salary level and who can access and understand the company accounts will be better placed to negotiate – or, as may be more the case right now, understand why increases may not be possible.

So as I go back to my writing the school programme  please tell me what do you know now that you wish you had learned about money and finance when you were at school that I should include. And what do you know  now about finance in relation to business that you think could be helpful for all employees to learn?