The UK Government should insist on making bank accounts mandatory for 16 year olds, according to Simon Culhane, Chief Executive of the Chartered Institute for Securities & Investment (CISI).
In the February edition of the CISI's Securities & Investment Review members' magazine, Mr Culhane challenges Parliament to insist that each child is given, without charge, a bank account, at a bank of their choice: "We should help our children understand personal finance at a much earlier age, especially as electronic money transmission, whether through debit or proximity cards or by text is, or will be, the norm."
The mechanics, says Mr Culhane, are simple: "The bank account will arrive automatically, from central Government, at the same time as the individual receives their National Insurance number. The only form that will need to be completed is one choosing at which bank the individual wishes to open their basic account, and to advise that before their first withdrawal they will need to have visited a branch, provided a single piece of identification and their specimen signature." The bank's anti-money laundering requirements can be vouched for by central Government as it will have completed similar checks when issuing an individual's National Insurance number.
Mr Culhane suggests that this plan will ensure that, with minimal bureaucratic hassle, each child will be better equipped for the financial journey ahead. They will learn how to pay for goods and services electronically, budget, save and participate fully in financial society. "No longer will financial literacy be an academic subject. It will be practical, personal and highly relevant."
The catalyst for Mr Culhane's suggestion for mandatory bank accounts for 16 year olds was the motion, debated in the House of Commons before Christmas with much cross-party support, calling for financial education to be made a compulsory part of every school's curriculum.
"This is an overdue initiative. As the proposer, Justin Tomlinson, noted, debit card usage now exceeds cash usage. Within families, about 19% of parents have never discussed with their teenagers how to spend money and 32% have yet to talk about how to budget, or even describe what one is, while only 36% of people understand that the term APR relates to interest payments.
"No wonder that we are seeing a proliferation of payday loans whose interest rates are close to usurious and make the interest rate charged by a bank for unexpectedly being overdrawn look a bargain," says Mr Culhane.
Regrettably, says Mr Culhane, at the moment of truth the politicians shied away from demanding real change, preferring a tame motion asking merely for the Government to consider the provision of financial education as part of the current curriculum review. However, since the Government had already said that it was actively considering introducing financial literacy as part of the PSHE (personal, social health and education) curriculum, this was an opportunity lost.
The PSHE curriculum, says the CISI's Chief Executive, is almost universally derided by pupils and teachers alike. It is seen by many as a filler and isn't taken seriously by any party, partly because there is no exam. As a teacher giving evidence to the committee noted, "nothing concentrates the mind like an exam" and as a further witness commented "nothing concentrates a teacher's mind like an exam". Financial education is too important to be tagged on as an also-ran; it should be fully integrated into the maths syllabus and tested.
Therefore, when a child enters their twelfth year of formal schooling - in Year 11 and coming up to 16 - Parliament should have insisted that each child is given, without charge, a bank account, at a bank of their choice.
But the MPs should have been bolder still, says Mr Culhane, and seized the opportunity given to them by the EU requirement whereby Lloyds Bank will need to transfer one in five of its customers to the Co-op, without changing either the individual's sorting code or bank account number. They should have mandated the requirement that anyone with a bank account should be able to keep and port their bank account number.
Had they done so, then not only would they have given every rising 16 year old a key financial tool, but ensured real competition in the banking sector and allowed the individuals real choice with the ability to switch accounts as easily as their teenage peers change mobile phone providers. There is still time to do both.