Almost half of all Aussies are financially illiterate so what are we doing about it?
Ever wondered where you'd be today if school had taught you something truly useful, like how to manage your money?
It's a question that many of us have pondered - and policymakers and educators are increasingly asking themselves.
Around 8.5 million (45%) Australians are considered financially illiterate, according to the 2020 Household, Income and Labour Dynamics in Australia (HILDA) survey.
In this approach, financial literacy was based on the ability to correctly answer three key financial literacy concepts. These include:
- an understanding of interest rates, especially compound interest;
- an understanding of inflation;
- and an understanding of diversification.
This lack of knowledge and skills can lead to debt, stress, and poor financial decisions.
To address this issue, the FinEd Forum, a collaborative effort between Talk Money, Ecstra Foundation and Southern Cross Catholic College, was held at the school's conference centre in Burwood, NSW in November.
The forum brought together teachers, financial experts, and politicians to discuss innovative solutions. The goal: to help educators empower students with the financial knowledge and skills they need to thrive.
"Financial literacy is a core life skill," says Caroline Stewart, CEO of Ecstra Foundation.
"Declining financial literacy levels in Australia require a greater focus across all levels of government to ensure young Australians are taught about finance, understand basic money concepts and can make informed financial decisions."
The cost of financial literacy
Simply put, financial illiteracy costs money.
A global study by the International Federation of Accountants revealed that low levels of financial literacy led to lower savings, higher debt, and increased wealth inequality. This impacts not only individuals but "society as a whole".
Many countries are actively working to address this issue. More than 70 nations, including most G20 members, are developing or implementing national financial literacy strategies. However, Australia's National Financial Capability Strategy is currently inactive.
"We need a national approach involving educators, community organisations, industry, and government stakeholders," says Stewart. "This needs to start in primary school and be reinforced at key life stages."
While the broader economic issue of financial illiteracy is significant, it's young people who will bear the brunt of the problem. Juan, a student at Southern Cross Catholic College, is concerned about the future.
"Things aren't getting any cheaper and we are vulnerable," says Juan. "It would be nice to learn more and be more knowledgeable about how to save money and spend money... to go out into the world and not be so scared."
Game-changing solutions to financial literacy
Like Juan, many young people are aware of the challenges they will face. However, getting them interested in financial concepts can be a tough sell.
The number of Year 12 students studying economics has plummeted in recent decades. In 1992, over 40,000 students enrolled in economics courses, according to research by the Reserve Bank of Australia. By 2019, this number had dropped to around 12,000.
To combat this, UNSW has developed Playconomics, an innovative ed-tech platform that blends video game elements with university-level financial and economic concepts.
Similar to games like The Sims, Fortnite, and World of Warcraft, the platform allows students to build and interact with a virtual world.
During a FinEd Forum workshop, UNSW economics professor Isabella Dobrescu explained, "We have a diverse range of students, from math and science enthusiasts to creative arts students. Some are eager to learn about investing, while others are less interested in numbers and equations, to put it mildly."
Dobrescu believes that Playconomics can bridge the interest gaps in these students by providing a common language and a hands-on learning experience.
"By making economic decisions in a virtual world, students can see the real-world impact of their choices," she says.
What's more, the game isn't just for fun. It's integrated into UNSW's Economics 1101 course, where a student's performance in the game directly impacts their real-world grades.
Today, Playconomics is also being used to introduce students to economics at an earlier age. It's a core part of the Girls in Business Camp and the UNSW STEP UP: Playconomics High School Outreach Program.
The Girls in Business Camp is open to Year 10, 11, and 12 female-identifying high school students in New South Wales who are interested in studying business, economics, or related fields at UNSW.
The STEP UP program provides high schools with the tools to incorporate Playconomics into their own curriculums, helping to prepare students for higher education.
Building financial literacy
While the Playconomics workshop was a valuable addition, it was just one piece of a larger puzzle. Among the other 23 workshops, sessions addressed essential topics like financial abuse, scams, and tailored learning approaches.
The forum itself is part of a growing movement to integrate financial literacy into school curricula. Yet, significant challenges remain.
"While financial literacy is included in some subjects like maths and commerce, students often have limited exposure as they progress through school," says Stewart. "Elevating financial literacy to a stand-alone compulsory unit in key school stages would be a welcome start."
While systemic change is essential, individuals also play a crucial role. By taking steps like budgeting, seeking advice, and educating themselves, Australians can improve their own financial literacy.
Lastly, as Peter Tsambalis, a financial wellbeing teacher at the Southern Cross Catholic College, advises, "Open your ears. Listen to those around you, including young people. You might even learn a thing or two."
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