More financial literacy needed
Life is getting harder but kids don’t have the money skills, writes Susan Edmunds.
Ashlee Sturme worries about the health of her six children – specifically their financial health.
The Edgecumbe mum is among a growing chorus who believe financial literacy should be taught in schools, so that kids are prepared for an increasingly complex world.
‘‘We should be teaching our kids how to meal plan, and budget, then shop for it, how to calculate for a mortgage, work out interest rates, how to call up a power company and ask for a better rate,’’ says Sturme.
‘‘The banks don’t care about you, the shops don’t care about your, big employers don’t care about you.’’ Sturme believes her children will face a harder time than her generation finding wellpaid and secure employment, and their own homes, and will rely on financial smarts more and more.
‘‘I don’t want my kids to be stuck in a rat race of working to get ahead, of sacrificing their dental health to pay for car repairs, of never having the security of owning their house.’’ She says young people are bombarded with advertising for stuff they don’t need and offers of more money, interestfree.
‘‘It’s so easy to get into a mess.’’
Hannah McQueen, founder of financial advice service Enable Me, says young people are ‘‘absolutely not’’ being given enough information about how to manage money.
‘‘Two generations ago we didn’t need to do as much. The conditions were sufficient that as long as you weren’t bad you should be OK. Now you need to be good to be OK, but young people don’t know how to do good.’’
Most are taking on significant student debt, which not only imposes a financial burden at the start of their working lives but desensitises them to borrowing, she says. ‘‘It normalises poor behaviour.’’
In 2019, about 365 people aged 20 to 29 entered into a no-asset procedure (NAP), an alternative to bankruptcy for debts up to $47,000 when the person has no assets.
That’s up from 234 in 2016. In 2016, people aged 25 to 29 were 15 per cent of NAPs but in the most recent year that had risen to 18 per cent.
Statistics NZ data shows that 15 to 34-year-olds have $13.752 billion in student loan and other debt, excluding mortgages.
McQueen says parents and schools should be doing more to set kids up financially.
Research from Sorted, run by the Commission for Financial Capability, showed 82 per cent of school leavers wish they had learned more about personal finance before they left school.
Sorted offers a Sorted in Schools programme, which is funded by the Government to support financial capability in secondary schools. It is integrated into the curriculum so that it can be taught alongside other subjects, such as maths.
Sorted currently provides resources for years 9 and 10,but is launching for years 11 to 13 in term two. It has signed up almost 70 per cent of all secondary schools and kura.
Kendall Flutey founded Banqer, a financial education programme also offered in schools. She says there is more being taught than many people realised.
In the past five years there has been a big shift in schools’ willingness to offer financial education.
Sometimes that was not even in a direct way, but could be through having kids organise a school camp and run the budgets, or selling tickets for a show.
‘‘People would be surprised. I always hear we need to teach this in schools, but we are doing more than people realise.’’
Sturme says she tries hard to be open with her children about what things cost.
‘‘Our son knows how much it costs not just to buy the motorbike he wants, but how much to run it, how much to get to his events and how much to put aside for maintenance.
‘‘He has worked out how many lawns he needs to mow and cars to wash, etc, to earn this sort of money. We tell them how much Netflix and their WiFi costs. They know that in return for doing the dishes and the washing and the usual pitching in, they get nothing, that’s life. For the extra jobs around home, we pay their phone credit. For big jobs over and above, they get paid.
‘‘We talk to the kids about how the mortgage works, and bank fees and loans and interests. The kids are still young, we know it’s not sticking, but we’re opening communication and making it normal to talk about money. We hope this will pay off when they make big financial decisions, or need some help if things don’t work out. We hope they’re learning about waiting for gratification of big purchases rather than frittering away on stuff they – and the world – don’t need.’’
She is now working through the Barefoot Investor tools for children.
‘‘He starts by getting the family eating together, working together on basic chores like setting the table, introducing money conversations, and then starting the Barefoot Money Meals. It’s so simple, you can’t muck it up, and so easy and quick, it’s achievable. The kids set goals, do their jobs, and get paid.
‘‘The kids then have to divide their money up, in a child appropriate way, in a reflection of how the adult money is divided. The kids can choose how much of their pay is put in each section: Give, Money, Splurge, as long as each payday, something goes into each pile! We’ve added an Invest section, and we’re going to start the kids in shares this year. We have never invested before and we’re learning about where to start and how to safely do it.
‘‘Over the last decade, we’ve tried pocket money, charts, banking, letting them spend etc, and nothing sticks. It’s hard to find a balance between the kids learning to save, and having fun buying the fun stuff they want.
‘‘But Barefoot has changed that. The kids have a little play money to buy their lunches or the chewing gum or the cheap toy they have to have today, they also have a goal for something bigger and more exciting, that they save up for.’’
‘‘Parents need to be self-aware enough to determine that this is a critical life skill that needs to be imparted and question whether they have that skill. If they do, are they the right person to deliver the message?’’ Hannah McQueen Founder of financial advice service Enable Me