I see a great many memes bewailing that schools don’t teach kids things like taxes, household budgeting and other such ‘adulting’ tasks. Once upon a time, of course, we learned such things at our parents’ knees. When my mother went back to work after her youngest (me) started school, we’d get home to find that night’s meal prepared and a note on what time to put each thing on. From there, we learned more and more self-sufficiency. Both my sons were encouraged to help out in the kitchen from a young age.
They appear to be a rarity: cook Stephanie Alexander has talked of how young people signing up for her cooking classes don’t even know the basics of preparing a family dinner. It’s all so much easier to get Uber Eats.
As for financial literacy…
Marlena Karbowski was working one day recently in the Liverpool, Sydney, branch of Westpac when a woman came to the counter seeking to cancel her home insurance.
Karbowski has been working in bank branches for decades: She knew from experience that someone cancelling their home insurance has bigger plans.
And, as it turned out, this customer had her $2m home up for sale.
As a veteran banker, Karbowski detected that something was not quite right. The woman had no plan to buy another home.
Despite the woman’s reluctance to explain, Karbowski persisted.
The story started to fall apart. After 45 minutes with the customer, it transpired the woman wanted to transfer money to an unfortunate prisoner in Turkey that she had never met.
A quick call to the Turkish embassy only drew further questions, whether the “prisoner” and his story might all be a scam.
An online image search of the perpetrator found him to be dotted across the internet in a variety of suspicious circumstances.
At that point, Karbowski agreed to walk with the now visibly shaken customer up the street to the Liverpool police station to make sure the crime was reported.
“This sort of thing used to be so rare – once or twice a month we had scam situations in the branch, now we are reporting incidents daily,” Karbowski suggests.
How many people out there have absolutely no clue about money? And why does it continue to happen?
Because too many people are simply clueless about money. According to a University of Western Australia report, almost half the population lack even basic financial literacy. Forty-five per cent don’t understand at least three basic financial concepts: interest rates, inflation and diversification. Anecdotally, I recall working with a youngster who proudly announced they’d taken out a loan for a new car. She was stoked that she was only paying a small amount every week for a new car! An older woman sat her down with a pencil and a calculator and showed her that she would end up paying nearly double the car’s value.
Consider this: What did you learn about money in school? Unless you did maths or business subjects, no doubt it was very little.
Paradoxically, the issue is that most people don’t do those subjects – and they are the very people who will take their super out for a Gold Coast off-the-plan apartment development or an “invitation only” crypto fund or, for that matter, a non-existent prisoner in Turkey.
And this is just the pointy end of the problem: More commonly, people don’t know what the Superannuation Guarantee Charge is, even though it is legally compulsory that they hand over more than a dollar in ten to their super fund.
Some don’t know what a mortgage is, and many don’t know what a mortgage offset is.
It might seem easy to sneer at young people, but it’s an all-ages issue. I have a middle-aged niece with a high-paying job. Yet, her parents are constantly bailing her out financially – and then complaining they’ve got no money.
In fact, financial literacy standards are declining across all age groups, and there are a litany of surveys to show this. The compelling evidence comes from the benchmark HILDA survey – the bible of social statistics, produced by Melbourne University with the Melbourne Institute. Younger people perform weakest here. In 2016 younger respondents scored 1.3 out of 5 on financial literacy – in 2020 the score fell to 1 in 5.
As Caroline Stewart, the chief executive of the Ecstra Foundation (a non-profit group), says: “Declining financial literacy levels require immediate focus from the government.”
Except the government doesn’t want to know.
One of the most important initiatives for driving change in government has been the National Financial Capability Strategy, which used to be run by the consumer regulator ASIC. In recent times this unit was transferred to the Treasury and little has been heard of it since.
The Ecstra Foundation politely puts it this way: “We recommend the government reactivate the National Financial Capability Strategy.”
Every year, Treasury calls for pre-budget submissions. This year, financial literacy advocates, including Ecstra and the Your Financial Wellness group, had several suggestions:
Make financial literacy a core stand-alone compulsory learning area in the school curriculum.
Force the Treasury to dust off the National Financial Capability Strategy to provide funding for developing financial literacy.
Get the Productivity Commission involved with an investigation into the importance of financial literacy – A rigorous investigation of the failings and opportunity in this area would represent real progress.
The Australian
Otherwise, fraudsters, whether Nigerian ‘princes’ or local Ponzi scammers, like the late Melissa Caddick, will continue to thrive at the expense of the financially illiterate. As banks continue to close branches and replace experienced staff like Marlena Karbowkski, fewer fools will be interrupted in the process of being separated from their money.
