Mathematics

The relationship between mathematics and personal finance

Mathematical thinking is important for all members of a modern society as a habit of mind for its use in the workplace, business and finance, and for personal decision-making.

Hence personal finance provides a relevant and engaging context for the development and application of many mathematical skills. By using and applying these skills in real life situations young people will see their relevance. Financial situations also provide living contexts where students can use and apply their functional mathematical skills.

Some examples of where the programme of study for mathematics at Key stage 4 refers to finance as a context:

Importance statement

Pupils who are functional in mathematics and financially capable are able to think independently in applied and abstract ways, and can reason, solve problems and assess risk.

Key concepts

Competence:

• Applying suitable mathematics accurately within the classroom and beyond.  Explanatory notes state: ’…requires fluency and confidence in a range of mathematical techniques and processes that can be applied in a widening range of familiar and unfamiliar contexts, including managing money…’
  

Applications and implications of mathematics:

• Understanding that mathematics is used as a tool in a wide range of contexts. Explanatory notes state: ’…this includes using mathematics as a tool for making financial decisions in personal life…’
  

Range and content

Number and algebra:

• Rules and arithmetic applied to calculations and manipulations with real numbers…explanatory notes state:  'includes using mental and written methods to make sense of everyday situations such as financial statements and transactions'.
  

Statistics:

• Experimental and theoretical probabilities…explanatory notes state:  'includes applying ideas of probability and risk to gambling, safety issues and the financial services sector…'

Curriculum Opportunities

Work on problems that arise in other subjects and in contexts beyond the school. Explanatory notes state: ‘Other subjects: for example, managing money in economic wellbeing and financial capability’.

Also, ‘contexts beyond the school: conducting a survey into consumer habits, planning a holiday budget, designing a product and measuring for home improvements’. Mathematical skills contribute to financial capability and to other aspects of preparation for adult life.

Some other financial contexts relevant to mathematical concepts and processes could include:

• understanding and calculating earnings and deductions, benefits and student finance
• making decisions about purchases, including calculating value for money alternatives and the best means of payment, such as using cash, credit or debt
• managing income and expenditure, such as accurately reading and understanding bills and statements, estimating budgets for independent living, or building a business plan for an enterprise project
• understanding, comparing and calculating the costs of fuel and water for homes
• comparing the returns on savings and investments, including interest rates, past performance and risk and return
• comparing the costs of different types of credit and loans 
• identifying the experimental and theoretical probabilities of different kinds of risks and how insurance may provide a cost-effective means of protection against them.