LONDON, 9 June 2003 — The sob stories are endless. Young people spending more than they can afford, and getting caught in a debt trap. Their clear and present lifestyle, the “now” culture, often precludes any preparation for managing of their personal finances. Not surprisingly, record keeping of income and expenditures are a mere tedium, not worthy of doing, until of course the tax authorities start breathing down their necks and they have to file tax returns.
Thanks to globalization and the IT revolution, financial services especially personal finance products — mortgages, savings plans, pensions, school fees plans, investment products, discretionary portfolios — are being bombarded into our sitting rooms through television adverts; text messages on mobile telephones; direct mail promotions; and even the odd house calls. Even children are now used in commercials advertising pension, savings and insurance products. At the same time, the number of financial products aimed at children and young people are increasing. Banks and buildings societies now have children’s accounts, which come complete with a bag of goodies when they first open the account. Others give incentives for opening children’s accounts
In Saudi Arabia for instance, at least two financial institutions Al-Rajhi Banking & Investment Corporation (ARABIC) and Al-Tawfeek Company for Investment Funds, part of the Dallah Albaraka Group, have children’s funds, in which young people or their parents can invest.
The Blair government has already introduced compulsory basic personal finance education into the National Curriculum. However, one of the latest interesting initiatives is that of the Personal Finance Education Group (PFEG), whose motto reads unequivocally: “Helping Teachers to Develop Financial Capability in Young People.” According to PFEG, the project was designed to meet the challenge of raising awareness of financial capability in the classroom, and to help teachers put personal finance education into practice. Between 2000 and 2004, PFEG will work with some 400 secondary schools in England alone, with some 40 local education authorities taking part across England with different types of schools, and different cultural, social, and economic conditions represented.
The project was started by contributions from the UK Department for Education & Skills, but it is almost entirely funded by corporate sponsors.
The danger of course is that children are very impressionable, and with the logo of one particular bank blaring at them boldly, they may become so attached to a certain logo that they think that there is only one bank to open an account with. PFEG are aware of the dangers of sponsorship and conflict of interest in this respect and stress that the sponsoring institutions do not interfere in the policy nor editorial content of the project’s literature. Children, whether ethnic or indigenous, are much more sophisticated than adults sometimes give them credit for. Talking down to them using anachronistic social, community, cultural, and family role play situations, may drive them away from the very empowering the PFEG project is seeking to do in terms of equipping young people to manage the financial complexities of modern life. Nevertheless, the British initiative should be commended and should be a model for other regulators, especially in Muslim countries, to follow.
The British government has stressed its concern over financial exclusion, and its desire also to promote community development finance. In February 2000, UK Chancellor of the Exchequer Gordon Brown launched “The Social Investment Taskforce,” which consolidated the work of the all parliamentary group on Socially Responsible Investment (SRI) on financial exclusion and community development finance.
On April 9, 2003, budget day in the UK, when Brown in a historic announcement in the House of Commons, said that the government is to introduce new legislation in the finance bill 2003 which will remove additional stamp duty cost incurred in alternative property financing schemes such as Islamic mortgages. Never before in British parliamentary history had any provisions relating to Islamic financial management been included in a UK budget, let alone any reference made to Islamic financial products and services.
According to Sir Eddie George, governor of the Bank of England, and a strong supporter of Brown’s initiative, “it seemed to me that the principle of live and let live should apply in an open and tolerant society. Indeed it seem to me also that as a matter of general principle, a wider range of financial products would benefit the whole of our community, and that Islamic products could prove to be attractive beyond the purely Muslim sector.”
This principle of live and let live is also a key aspiration of PFEG’s project. All children and young people should be equipped to deal with personal finance issues which will inevitably arise when they are older. But as PFEG stresses, young people must also understand that there are groups of people within society who may experience financial activity differently from themselves and that there are choices open to all young people in the way they deal with financial decisions.
For many Muslim countries, the British model of empowering children and young people to manage the financial complexities of modern life, should be worth emulating. There is a strong economic and demographic reason for this. In a country such as Saudi Arabia, where 60 percent of the population is under 25-years-old, this could prove a valuable investment indeed!