Martin Lewis: 'Borrowing has lost its stigma yet we're a debt-illiterate nation'  It couldn’t come too soon. Student loans have hit the grand old age of 20, yet it’s taken that time for politicians of any hue to realise that government-enforced borrowing must be coupled with government-enforced financial education.  Download your free guides to making the most of your money  Even so, being money-savvy needs more than just a classroom, so, as I’ll explain later, there are three vital Teen Cash Class lessons to teach your children.  It’s about breaking the debt habit  Modern Britain has a nasty debt habit. While many of the grandparental generation follow the ‘’neither a borrower nor lender be’’ mantra, some of today’s parents are debt-bingers relying on plastic as a crutch to fuel unsustainable lifestyles.  We’re left with an unnatural juxtaposition; borrowing has lost its stigma – after all we need it to buy houses or get educated – yet we’re a debt-illiterate nation. And while we need to accept that debt’s fire used correctly is a powerful enabler, too many still get burned. So the challenge is what and how we teach our children to stop passing on bad messages and break the cycle of debt.  For too long, the only financial educators in some schools have been banks and a cynic might say this is touting for trade, disguised as generosity.  After all, it was once calculated that people are more likely to get divorced than change a bank account. So if banks bribe 10 year-olds to join with a cheap plastic toy, they may still have them as customers half a century – and thousands of pounds in profits – later.  Not every bank aim is Machiavellian, but if we’re going to invite banks into schools, let’s ask 10 in to compete for business and show pupils how to assess their offers. This may just help teach that a bank’s prime job is to sell us products, not help.  To start wee ones off correctly, we need to underpin that the modern world is all about competition and marketing. For that, there’s nowhere better than those cathedrals of consumerism we call supermarkets.  When there with under-eights, ask them “why do you think there are sweeties by the till?” And when those cherubic faces look up, explain that it’s because “a supermarket’s job is to make money, so they put the sweeties there so you won’t forget to ask mummy or daddy for them; that way they might make a little bit more money”.  Financial education will become a compulsory part of what’s known as Personal, Health and Social Education (PHSE) – a life class that also includes sex, drugs, hygiene and health education taught to all primary and secondary pupils.  Personally, I would also love to see an intensive couple of weeks taught to 16 year-olds after they’ve finished GCSEs and before end of term – the perfect moment to prepare them for the real world.  Yet the core concern is what’ll be taught; much of the exact curriculum is still being developed, although certainly in early years it’ll start with the basics covering how notes and coins work – and in senior school feature interest and credit cards.  But bank accounts and how income tax works isn’t enough; we need to set them up as effective empowered consumers. Companies spend billions of pounds a year on marketing, advertising and teaching their staff to sell, so this is a wonderful opportunity for schools to engage in what I call buyers’ training.  It can pay real dividends – a couple of years ago, in an experiment filmed for ITV1’s Tonight programme, I was parachuted into a school to see what I could teach a dozen 15 year-olds in a ‘’Teen Cash Class’’.  The results were astonishing. After just one day, the students went home and saved their parents a combined £6,000. That leads to two obvious conclusions: first, there’s a need for financial education in schools; and second, there’s a need for financial education of adults, too. After all if their children can save them so much, not everything is right.  The class worked so well, I was asked to convert the lesson plans into a free guide, which I’m pleased to say has now been downloaded by teens, parents and teachers nearly 500,000 times.  Thankfully, there is room to include this type of teaching in the curriculum. I know as I was recently asked in by Ed Balls, the Children’s Secretary, to discuss what’s being taught. They will now be incorporating the Teen Cash Class philosophy into elements of the teaching – and it’s already under way with the help of finance education group Pfeg.  And putting my money where my mouth is, I’ve volunteered to go and start to talk to teachers to encourage them on the subject. After all, during the original Cash Class, I found the teachers I met in staffrooms were bursting with even more questions.  As a clarion call, it’s worth remembering this has taken years to come to the table – no matter who forms the next government, it’s crucial nothing derails it. Perhaps, had we started teaching about money a couple of decades earlier, our recession would not have been nearly as deep.  There’s nothing more important than understanding that companies aren’t there to help, give advice or be your friend; they’re there to make money.  It doesn’t make them bad or wrong; it’s just something that needs to be understood. So when you see sexy adverts or marketing trying to target your spending impulses, remember someone’s spent serious cash targeting your desires to loosen your pockets – even when it isn’t necessarily the right thing to do.  That’s the reason Dragons’ Den isn’t called Fluffy Bunnies’ Den: their job isn’t to help, it’s about profit.  So don’t let them get one up on you – every time you buy something, step back and ask ‘’do I need it, will I use it, have I checked if it’s available cheaper elsewhere?’’ If not, keep the cash in your pockets.  Grandparents can be very dangerous. If they tell you never to borrow, don’t listen! If you want to buy a house or go to university, you will need to borrow, unless you have super-rich parents.  What is crucial isn’t whether you borrow but how. Massive differences between different types of debt mean getting it wrong can cost thousands of pounds. And that’s the problem with the ‘’don’t ever borrow, little Johnny’’ attitude because if it’s all bad and you need debt, you mightn’t focus on the right type.  Many students leave university with more than £10,000 of borrowing. Each year, when I’m interviewed about the new student debt figures, I answer: “It’s not how much, but how much of each type that counts…”  Good debt. Official student loans are the cheapest long-term debt you’ll ever get (currently 0pc) and only need repaying if you earn more than £15,000. You pay 9pc of anything earned above that, so the more you earn, the more you repay.  OK debt. Banks try to buy your custom with interest-free student overdrafts. Yet if you’re still in debt when you graduate, the rate shoots up to 18pc. Use this for short-term cash shortages if necessary but not long-term borrowing.  Bad debt. Get a credit card, loan or hire purchase as a student and it’s a nightmare. High rates mean you’ll owe more and more – when you’re a student, it’s tough to repay. In a nutshell, avoid.  Far too many students who’ve been told ‘’don’t borrow!” but find they need to, end up with the worst debts, as they don’t delineate between different types. What you need to learn is that debt isn’t bad – ensure it’s for the right reason, it’s affordable and borrow as little and as cheaply as possible. What’s bad is bad debt.  While it is an important quality with friends, family, girlfriends and boyfriends, when it comes to dealing with mobile phone companies, brands, insurers, banks, shops and more – loyalty is for losers.  Most of the best deals are for ‘’new customers’’. If you look around the market place, they need to fight to win your business, which tends to mean more money in your pocket.  For example, car insurers offer their very lowest rates to win new business, tempting people in with ultra-hot deals. Yet when it comes to renewal, your price goes up as you’re paying for the newbies’ discounts. Shockingly, often if you apply to your existing company as a new customer with identical facts, you’ll usually be charged much less.  To download a copy of Martin’s 40-page free ‘Teen Cash Class’ guide, go to www.moneysavingexpert.com/family/teenagers-cash-class. It’s designed for teens, parents and teachers (and some adults may benefit, too!). Martin has waived copyright for educational use – so teachers or others wanting to use and reproduce some of it for education are free to do so
As a nation, we&rsquo;ve educated our youth into debt, but never about debt. Yet    that&rsquo;s all going to change &ndash; from September next year personal finance    education will be a compulsory part of the school curriculum.