In a rocky economic climate, we need to teach our kids about money
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April is financial literacy month, and it’s a good time to think about both your own financial knowledge and how much your kids know about money in this increasingly complex financial world.
You might be hoping school will do the heavy lifting for you but, unfortunately, financial literacy isn’t explicitly taught under the national curriculum. Some lessons are incorporated into maths, although these tend to be equation-based with little context as to when they might be used.
While you might be hoping school will do the heavy lifting, parents need to take control of their kids’ financial literacy.Credit: Virginia Star
This runs contrary to research from the Financial Basics Foundation that found kids best learn about financial concepts if they are given real-life examples. Maths can also be polarising for some young people, with a perceived weakness in the subject causing many to switch off any potentially beneficial money lessons it may contain.
High school electives like commerce, business studies and economics impart some financial literacy but are not studied by all students, with girls, in particular, underrepresented. Figures from the Reserve Bank of Australia show the number of year 12 students studying economics has fallen 70 per cent since the early 1990s. It’s a statistic that has – in part – been blamed for an alarming drop in financial literacy among Australian kids.
An OECD survey found that the financial literacy of 15-year-old Australians fell by 15 points between 2012 and 2018 – the equivalent of six months of schooling. The 2020 Household, Income and Labour Dynamics in Australia survey – which tests financial literacy based on answering five money questions – found that the average number of correct answers for Australians aged 15-24 was 2.9, down from 3.4 in 2016. It was the biggest decline seen in any age group.
Financial literacy is listed in the national curriculum as a priority that kids should learn, but it’s left up to each school as to how they deliver this. Often it falls by the wayside; finding time in a crowded curriculum is one challenge, as is the financial literacy of the teachers tasked with delivering this content.
It’s not surprising then that 96 per cent of students who learn about money do so at home. But the problem is that many parents face the same challenge as our teachers, with just 68 per cent of Australian adults being financially literate.
And a lack of knowledge may not be the only barrier parents face. Many adults feel that discussing money is taboo, or crude and impolite. But once you get over this stigma, how do you go about providing your kids with a financial education?
The research shows these lessons are most effective when based on real-life scenarios, so where better to start than your own finances? Involve kids in discussions about family money management. Show them how you budget for bills, how you save for big expenses and – if you use debt in the form of a personal loan, mortgage or credit card – why you use it and how it works.
If experience is the best teacher, the economic stability we enjoyed for years is blamed as another reason behind falling financial literacy among young Australians. The current economic climate is much bumpier, prompting discussions about inflation, rising interest rates and bank failures.
If you lack understanding yourself and need to learn along with your kids, the government’s Moneysmart website has explainers on many money topics that are easy to understand.
And remember that while building their financial literacy is an essential building block for a successful life, teaching your kids about money is not an entirely altruistic pursuit. It just might save you from joining the nearly half of Australian parents who serve as the Bank of Mum and Dad for their adult children.
Michelle Bowes is a personal finance journalist and author. Her book, Money Queens: the teen girl’s guide to money, is available in bookstores and online now.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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