Opinion: financial literacy helps kids understand the function of the public sector in an economy

By Bill Tsouvalas

September 11, 2020


Reading, writing, and arithmetic – the three “R”s as they’ve been known throughout history. We agree that these three areas of knowledge are fundamental for functioning in a society.

What about finance and economics?

As we all know, we live in an economy. Kids will grow up buying things, earning money working for pocket money or part-time, pay taxes, pay into super, and take out some kind of finance such as credit cards, car loans, or the Australian dream: a mortgage.

They’ll also have to interact with the public sector; understanding what type of benefits they may need if they fall on hard times. Right now, a lot of school-leavers may be finding it difficult to work, which means they may have to apply for JobSeeker or JobKeeper. Young Australians may have to work with the public sector in terms of gaining grants for business, allowances to buy their First Home, or tax benefits when starting a young family.

Of course, these sort incentives and relief measures don’t last forever and are subject to change. Sound principles of saving, investing, and understanding the broader impacts of the economy will.

Our company Savvy Finance commissioned a survey in January, looking at the financial literacy of Australians. It was partly borne out of curiosity, but mostly out of disbelief. The Household, Income and Labour Dynamics in Australia (HILDA) Survey commissioned by the Melbourne Institute for 2019 showed only 50% of men and 35% of women could answer all the basic financial questions correctly. the Australian Securities and Investment Commission’s 2017 Financial Capability Survey showed that only 35% of Australians know the exact value of their superannuation.

What we found is cause for concern

About 35% of our 198 respondents said they had a “fair” working knowledge of finance and economics – about a primary school level of understanding. How are we meant to teach our kids the fundamentals of economics, especially how the private and private sectors intersect to create a modern, thriving economy?

Twenty-nine percent of kids didn’t have a savings account; 30% of parents have never discussed the difference between good and bad financial habits with their kids. They are fond of letting them find out “the hard way” – 42% of parents saying they would have to work for their income if they were working age. Every time they go to work, as far as these kids are concerned, a portion of their income is taken away never to be seen again for reasons unclear. I am of course talking about superannuation.

Thirty-two percent of parents have never discussed superannuation with their kids. This is one of the biggest – if not – the biggest public and private sector partnerships in Australia. If kids aren’t getting it from their parents, where are they getting from?

It’s not from schools – 52% of parents say the schools should take the lead in financial education. Kids may not even get a look in at formal finance or economic education until they’re old enough to work for themselves – about Year 10.

In the early 1990s, economics was the third most popular subject in NSW’s HSC – behind English and Maths. Now it’s not even in the Top 20. So, what can be done?

What the public sector can do

The National Financial Capability Strategy, led by ASIC, is a good start.

The NFCS, showing children and adults how to manage money more effectively, the impacts of economic shifts, and the role a robust public sector has to play, can help all Australians create the kind of stable and prosperous financial future; the kind of future we all hope we can bequeath to our children.

The Financial Wellbeing Network that “brings together practitioners, educators, researchers, policy makers, academics and other professionals who are committed to empowering Australians to be in control of their financial lives,” in my opinion, needs to be more aggressive.

Right now, when economic and financial uncertainty abounds, individual government departments such as Centrelink, The Australian Taxation Office, ASIC, Fair Work Ombudsman, and the Reserve Bank should think about developing a comprehensive curriculum showing kids what their individual roles are in the economy, what their rights are when it comes to work, how superannuation helps them in retirement (or even the concept of retirement), how they can use government to help them help themselves as would-be entrepreneurs – such as applying for innovation grants for example.

This shouldn’t just be “tacked on” to an already crowded primary and secondary school curriculum – it needs to be holistic, sustained, and comprehensive.

Kids already know about economics every time they’re out in the playground. They know choc chip cookies are “worth more” than trail mix when trading play lunch among each other. They already know that the “premium” Fortnite skins are worth “real” money instead of the coins earned while “grinding” in the game. It’s all a matter of making these concepts tangible and exciting to kids so they’re eager to learn.

Together, we can make a real difference in the financial wellbeing of our children – another successful partnership between the public and private sectors.

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