10 ways to improve money education for children

In the third and final part of our series on financial literacy, Cameron Bagrie and John O’Connell say too many young people are leaving school without even a basic understanding of money – and that needs to change.

We need to lift our game on financial education. It’s fine to criticise, but commentators also need to ‘‘pony up’’ with ideas. We offer 10 in this article. Financial education isn’t just about encouraging 15 year olds to save for retirement or calculating compound interest.

The Pisa (Programme for International Student Assessment) tables included financial literacy for the first time in 2012. It measured the abilities of 15 year olds and New Zealand ranked well – overall. It’s the overall that is the key, because within overall we have some telling problems. ‘‘Overall’’ is a smokescreen.

Only eight per cent of New Zealand students were in schools where financial education is compulsory, compared to the OECD average of 28 per cent. In schools where financial education is taught across the curriculum, 10 per cent of New Zealand students were taught less than four hours a year.

Pisa creates five levels of assessment and level one is described as 15-year-old students having a basic understanding of money, however, states ‘‘they are not well placed to apply their knowledge to real-life situations involving financial issues and decisions’’. Digging into this we find:

NZ had 50 per cent more level one students than Australia.

Students in lower-decile schools had significantly lower understanding than those in higher deciles.

Disparity – 44 per cent of Pasifika students are in level one and Ma¯ ori at 27 per cent.

The poverty trap and intergenerational impact of poor financial skills is real. Without ‘‘knowledge to apply to real-life situations involving financial

issues and decisions’’, strategies to lift household income will have limited impact.

10 ideas

1 Ditch the term financial capability. It doesn’t connect with kids. We have up to 44 per cent of 15 year olds with limited skills to make core decisions that can shape their life. Time for a rebrand. It’s a life skill, not an academic outcome. We want the kids to have money mojo.

2 Inclusive, not exclusive. Financial education needs to be on offer in all schools and especially in low-decile schools. Financial education needs to start young, but it is in secondary schools where we appear to have the largest gaps. Banqer High is a welcome addition.

Adopt a cross-curricular, whole-of-school approach, treating money mojo as a critical life skill. The greatest time spent teaching financial education in New Zealand schools is currently in a business course or a specific elective subject. That needs to change.

3 Be more responsive to current and evolving conditions. Our nation has a debt burden that is 150 per cent of GDP. Today we have a new debt threat targeted at young consumers. The Government moved to cap the ‘‘loan shark’’ activities last year, but the emerging short-term deferred-payment players are operating in an unregulated market and rapidly growing as debt is racked up.

4 Be culturally relevant. Money is responsible for so much of our inequity in society. Our money mojo has telling stats across ethnicities and we’re missing the mark. It’s not a one shoe fits all. Collectivism and communitarianism is as strong as individual wealth goals are for others. Money management has different concepts across our communities.

5 Make learning life skills relevant. When it comes to money matters, just 14 per cent of students said they learned a lot from school, and half said they learnt little or nothing. Last week we talked of the dated approach of PDF files for kids to download and complete tasks. It’s 2020 and young people live in a digital world of gamification. Understanding and being relevant to your customer is key. Banqer is a leading example and the Commission for Financial Capability should get behind it.

6 External providers are needed. In New Zealand, 98 per cent of students are in schools where financial education is provided by teachers. In the OECD the average is 85 per cent. We know teacher workloads are excessive and we know very few hours are spent on financial education. External expertise wins all round. The Ministry of Education NMSSA report identifies that in primary schools, 86 per cent of schools choose to use Life Education as a specialist external health education provider. The scope for the same approach exists in financial education but the external providers need to have the scale. It can’t be piecemeal and ad hoc.

7 The banking sector should be far more proactive as a group improving financial education. It’s about pursuing stakeholder capitalism and investing in New Zealand for tomorrow as opposed to shareholder-based capitalism and profits for today. The finance sector has the resources to make a major difference. Organisations such as the Reserve Bank, KiwiSaver providers and NZX can beat a drum too, not a tambourine. Improved financial education brings positive long-term benefits to these players.

8 Role of government in society. Young people pay tax through earnings and consumption. Yet they have little understanding they are a contributor to local services. An Australian study identified a loss of connectivity with the demise of annual tax returns and automation of tax processes. The answer to declining voter turnout may lie within our financial education and understanding civics.

9 Collaboration. A multitude of programmes and resources are being offered to schools but there is little collaboration or backing of what is successful. The Ministry of Education released new resources for schools in 2014 so in 2017 the Ministry of Business, Innovation and Employment contracted the Commission for Financial Capability to do the same for schools. Not a great example.

10 Fronting up. Life Education is getting into the game this year. We’re collaborating with another established provider, not replicating what’s already there. We’re bringing innovation to the financial education challenge and engaging with young people. In our mind, the financial education of our tamariki and rangatahi is an important part of fulfilling why Life Education was set up 32 years ago and continues to be the largest provider in schools today. Let’s take a wider, long-term look at lifting people out of the poverty trap and give meaning to the phrase improving wellbeing. Band-Aid strategies don’t have lasting outcomes.

Let’s take a wider, long-term look at lifting people out of the poverty trap.