“Education is the most powerful weapon which you can use to change the world.”
– Nelson Mandela
We live in the twenty first century and our school curriculums are still turning out children woefully underprepared to meet the challenges of living in a complex economy. The failure to educate our kids about money: Oversight or something else? Parents remain the main port of call for communicating the importance of comprehending how the financial system works and how it will directly influence the financial wellbeing of their children. There seems to be a long standing and ongoing disconnect between the theoretical subjects taught at schools and the practical knowledge required to make your way in life.
Economics is a well established subject taught in secondary school but it is not directly linked to the financial literacy of the individual consumer. Schools need to ground their curriculums in real life applications, especially when it comes to the workings of the financial realm. Young people, in general, struggle to maintain interest levels in overly theoretical studies, and yet we continue to follow this strategy primarily in our educating of our children. One of the main reasons given, as to why students drop out of secondary school after year 10, is that they want to partake in real life by getting a job and all that goes with it. They are sick of studying stuff theoretically and want to just get stuck into living. Unfortunately, in most cases they are not prepared in terms of their financial literacy and make a lot of expensive mistakes. The young are often exploited by financial institutions and their sales representatives.
Educating Financial Literacy In Australia
“Australia has a relatively high level of financial literacy when ranked globally. In the 2014 Standard & Poor’s Ratings Services Global Financial Literacy Survey of a 140 economies, Australia, for example, ranked in the top 10 countries for financial literacy.1 Notwithstanding this favourable global performance there is widespread financial illiteracy within Australia, particularly amongst young people. There are also large and significant gender gaps with women, on average, less financially literate than men. Within Australia 63% of men and 48% of women demonstrate an understanding of at least three basic financial literacy concepts. If understanding three basic financial literacy concepts can be considered financially literate, then these statistics suggests that around 8.5 million (or 45%) adults in Australia are financially illiterate.”
– (Prof. Alison Preston, UWA Business School Report, 2020)
In some ways, we see this exploitation and stuffing up financially as a rite of passage for our young. It is like in nature when predators prey on the vulnerable offspring of other animals. The world of money and finance retains that law of the jungle ethos, where only the strong and canny survive. Is this, however, an outdated and lazy way of looking at the situation? Could we lift our game across the board, especially the financial sector and our educators, and properly prepare our young people for the challenges ahead?
“In 2016 only 28% of teenage males and 15% of teenage females were able to correctly answer all of the Big-3 financial literacy questions.
“Q1: Interest Rate : “Suppose you put $100 into a no-fee savings account with a guaranteed interest rate of 2% per year. You don’t make any further payments into this account and you don’t withdraw any money. How much would be in the account at the end of the first year, once the interest payment is made?”
Q2: Inflation : “Imagine now that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, would you be able to buy more than today, exactly the same as today, or less than today with the money in this account?”
Q3: Diversification : “Buying shares in a single company usually provides a safer return than buying shares in a number of different companies.” [True, False]”
– (Prof. Alison Preston, UWA Business School Report, 2020)
Financial Education For The Young Found Wanting
There are a few key reasons why our school system has failed to adequately educate our young about the financial system for consumers with particular regard to credit and debt. Number one is that we do not mandate financial literacy as an essential part of the curriculum. It may be an elective available at some schools but it is not a universal prerequisite subject. Until we do that, until we honour this vital life skill within the education system, we are wasting our breath. The fact that a portion of students might get some instruction in this area and that many will receive none at all is a remarkable omission in this day and age. The frustration felt by some within the education sector at such black holes and the general orientation toward the impractical and theoretical continues to aggravate many in the community. Drilling down further we find that these elective financial literacy courses are taught by non-experts in the field. Thus, teachers without any real training in this subject or direct life experience are, often, conveying financial literacy education in piecemeal fashion. Therefore, inconsistency and shallow outcomes are not uncommon results for students studying this elective. The course can, also, suffer from a lack of integration into other units being studied by students. This can isolate the learning from many of the related topics covered in economics, like inflation, interest rates, and CPI which are all highly relevant in the current climate. What the study of financial literacy really requires is the participation of expert educators and actual financial planners from the sector. The industry itself should be involved in educating our young about things like consumer credit and debt. These are their customers of the very near future, who are about to engage with all the products offered by banks and financial institutions. These experts can provide the most up to date and accurate information for the study of this vital life skill.
Empowering Through Inclusion
If you want people to engage with a topic you need to empower them via inclusiveness. If you want to educate children and young people about money and finances, we need to get them involved in the processes from an earlier age. Screening kids from responsibility, including financial decisions, only delays their ability to integrate these essential life skills. Money makes the world go around in many ways and the sooner our children understand this the better equipped they will be to live full and rewarding lives. Parents who shield their kids from the truth about their own financial status quo are only creating problems for these young people down the track. It reminds me of my takeaways from watching Hollywood films about families – parents are constantly lying to their kids in this deluded sense or claim that they are protecting them. What they are actually doing is creating confusion in the mind of the child and ill-preparing them for their life ahead.
“According to Scott Pape — author of the Barefoot Investor and whose program Money Movement is screening on Foxtel’s Lifestyle Channel — most children don’t learn the necessary financial skills they need at school. More than 100,000 people have signed his recently launched petition to bring a “financial revolution” to schools.”
– (Emily Ross, 2021)
Idealism Inhibiting Our Education Systems
“It is not materialism that is the chief curse of the world, as pastors teach, but idealism. Men get into trouble by taking their visions and hallucinations too seriously.”
– H.L. Mencken
Men and women, I would add to and amend this incisive quote.
Our education curriculums have suffered from an overdose of idealism and have been seriously short-changed in realism. Back in my day, we used to learn about the glowing lives of colonialists in our history classes, where their actions had been whitewashed clean to a boring sheen. We would glaze over as long renditions about the exploits of Captain Cook were declaimed aloud. Some of this distortion has been removed from the modern curriculum but money remains a dirty topic ignored by most teachers in favour of more academically sound subjects. Financial literacy needs to become a mandated stand-alone subject that begins in primary school in grades 5 and 6. Kids are growing up much faster, according to studies, and they require a solid grounding in money, credit, debt, and investing. The days of spurious examples in maths classes featuring examples about transactions in shops is not enough on their own to teach our kids financial literacy. It is a far more complex business deserving of its own course structure.
“We teach children to save their money. As an attempt to counteract thoughtless and selfish expenditure, that has value. But it is not positive; it does not lead the child into the safe and useful avenues of self-expression or self-expenditure. To teach a child to invest and use is better than to teach him to save.”
– Henry Ford
Henry Ford may not be the best example of a well rounded individual but he was a highly successful entrepreneur – the iconic American businessman of his time. This quote must have been written nearly a century ago but the truth of it remains pertinent in relation to our education of children in relation to financial literacy. Henry Ford, however, treated his own son badly in the end, unable to pass over control of his empire and disempowering his son into an early grave from cancer.
“The most important thing we learn at school is that the most important things can’t be learned at school.”
– Haruki Murakami
Clever and true, but defeatist in attitude as well. We must make an effort to provide a better level of financial education to our kids at school from an earlier age.
Technology Can Enhance Financial Literacy Education
Technology provides a powerful window with which to enhance the educational opportunities inherent in the wonderful world of finance. There are so many digital platforms revolutionising how consumers engage with financial products around the globe. Mobile banking is in the pockets of most urban Australians now. The latest financial technologies are expanding into areas like investment in a whole host of different products. Training students to become familiar with these tools will empower them going forward.
Are Schools Fearful Of Such Things?
Investing in the markets with all those derivatives and futures can appear to be very complex. Scary stuff, perhaps, too scary for our humble teachers and state education systems? Most Australians remain fairly ignorant about the financial realm and its possibilities. A lack of financial literacy will hold this nation back, especially when the coal and gas can no longer be dug out of the ground. Ten years of conservative, head in the sand government has put us behind the eight ball when it comes to climate change and transforming the domestic energy market. Releasing the shackles from an outdated and outmoded education system will give our kids a fighting chance in tomorrow’s world. It is time to put the foot down when it comes to opening up how we educate our kids to be ready for life in a brave new world.
“ASIC’s early policies and strategies were used to influence aspects of the current Australian Curriculum, which frames significant opportunities for teaching about work, resource allocation, consumer rights and protections, and financial mathematics. The Australian Curriculum links to Scootle resources to help teachers plan for learning. Many of the consumer and financial literacy resources were produced by ASIC under the MoneySmart Teaching brand. However, nothing was done to regulate the presence of the Commonwealth Bank in schools, and it has continued to promote its Dollarmites and StartSmart programs in schools, cultivating children’s trust in its brand.
Generations of students have completed schooling while we have relied on finance industry expertise to guide money-related education. Yet research shows that schools still vary in how they represent the curriculum in their programs. All address the content as it features within learning areas like mathematics. Others make connections between mathematics and economics through thematic programs, although after Year 8 these tend to be elective studies and not all students choose them.”
– (https://www.aare.edu.au/blog/?p=9823)
The Commonwealth Bank (CBA) long played a part in the early education of our young Australians about money, saving, and banking via its presence in schools around the nation. The privatisation of the CBA, however, in 1991 created some doubt about its long involvement in school banking and financial education. It was no longer a nationalised institution but rather a commercial entity. Teachers and public servants in state education departments were concerned about conflicts of interest and an absence of impartiality. In 2021, CBA finally pulled the plug on the 90 year program.
“Commonwealth Bank will close its school banking program, following a critical ASIC review of school banking arrangements and moves by state government to discontinue them.
In December last year, ASIC released a report on school banking services, with the key finding that providers of the service were unable to demonstrate that their programs improved savings behaviour, despite their claims that the programs helped children develop long-term savings habits.”
-(https://www.bankingday.com/cba-out-of-school-banking)
Studies around the globe reveal that financial literacy is low among young people and getting worse not better. (Garg, 2028) There are strong correlations between financial knowledge and behaviours and attitudes around financial matters. Schools must become portals for more practical applications of life skills like financial planning and understanding money in its many forms. We live in an age of credit funding our lifestyles and economy. Credit and the consumer credit file are, I think, topics worthy of serious study at school. It does appear as if we are afraid of delving into topics as real as credit and debt, especially of our kids delving into these very real subjects. Are we, as adults, somehow ashamed of our economic addiction to credit. Is it secret adult’s business? Something you only learn from personal experience like a shady sexual initiation. We trumpet the virtues of saving but very few of us actually do it, like going to church in the twenty first century. It reeks of, “do as I say, not as I do.” Some adults still don’t want their kids to learn about sex education at school. Do we as a collective shy away from our kids learning about credit, debt, consumer credit reports, and the litany of financial penalties like default notices, court orders, and bankruptcy. Do we want their hopes to be so rosy that we block out any mention at school of such importune occurrences. I wonder!
Credit Files Can Be Repaired
Stained sheets can be washed and credit report bad listings can be removed if they are found to be incorrect. In the same way, we hope our kids can bounce back from early knocks and falls, a bad credit rating can be repaired. Consumer credit law specialists can work their legal eagle magic in certain circumstances, where errors have been made on the credit report.
The first step is to get hold of your free copy of your consumer credit file from the credit bureaus.
Experian Ph. 1300 783 684
Illion Ph. 1300 734 806
Equifax Ph. 138 332
You can request a free copy from each of these agencies every 3 months and/or if you have been rejected in your application for credit from a provider. Check the fine print on your file and examine carefully every listing. You may like to engage the eagle eye of a No Win No Fee credit report lawyer to really zero in on all those details with the necessary expertise. There are a number of things you can do if you find evidence of mistakes on your file. Contact the provider and inform them of what you have found and ask for it to be remedied or removed. Contact the credit bureau and inform them as well.
Remember that it is really important to the effective functioning of your financial life that your credit report exactly represents your activities. There is no room for slap dash renditions on your file.
Young people regularly make mistakes and the financial realm is somewhere that they come a cropper often. The fact that they were not adequately schooled in financial literacy doesn’t help. Unfortunately, making a mess of their finances can impact severely on their lives for a good number of years. However, it is rarely game over and with the right help they can take the slow road to redemption. We do need to change the way we educate our children about the financial realities of life. Getting real at school about credit, debt, and the credit file system is an important part of that long overdue overhaul to the education process. The technology is there we just need some leadership grounded in the realities of life rather than misty eyed idealism.
References:
Prof. Alison Preston, Financial Literacy in Australia: Insights from HILDA Data, UWA Business School, 2020, Viewed 23rd January 2023.
Emily Ross, Aussie kids’ financial literacy is on the decline. The proposed national curriculum has downgraded it even further, The Conversation, July 2021, Viewed 23rd January 2023.
Garg, N. and Singh, S. (2018), “Financial literacy among youth”, International Journal of Social Economics, Vol. 45 No. 1, pp. 173-186. https://doi.org/10.1108/IJSE-11-2016-0303
Totenhagen, C.J., Casper, D.M., Faber, K.M. et al. Youth Financial Literacy: A Review of Key Considerations and Promising Delivery Methods. J Fam Econ Iss 36, 167–191 (2015). https://doi.org/10.1007/s10834-014-9397-0