Why it has gotten harder to teach kids about money
Recently I was having a chat on ABC Radio about kids and money. It is not a simple topic.
There is a lot being done in our schools, universities, TAFEs and VET colleges, and in apprenticeship courses, and this is a really good thing.
I have chaired the Australian government's Financial Literacy Board for the past 15 or so years and I am really pleased with the progress being made. Sure, it would be great to do more and move faster, but there is only so much money to fund even the best initiatives.
It would be quite ironic if financial literacy, which promotes spending less than we earn, did not recognise that our federal government is running big deficits and needs to either raise more revenue or cut spending.
Kelly O'Dwyer, our Minister for Revenue and Financial Services, Greg Medcraft, the chairman of our regulator ASIC and I were in Canberra earlier this year to launch the updated National Financial Literacy strategy and to give a briefing on the latest developments.
The big picture is very good.
Over 6 million unique visitors came to the MoneySmart website and some 260,000 people took some form of financial education program.
Moving to a key focus of financial literacy, "Educating the next generation", the positive news is that over 50% of schools are now engaged with the MoneySmart teaching program.
In mathematics for Years 1 to 10, financial literacy is required to be taught. If this interests you, please take a look at the national financial literacy strategy at financialliteracy.gov.au. To see what is available to teachers of the next generation, go to moneysmart.gov.au/teaching.
But my chat was much broader than formal education.
Our education system, ASIC, the media and access to unbiased information via websites such as MoneySmart are all terrific stuff, but the obvious question, which I get constantly, is why is this knowledge the role of educators and regulators; what about the traditional role of parents? And a very good question it is.
The answer is not that we parents have become hopeless at passing on money skills. It is that the whole world of money has been turned on its ear.
The biggest change and the hardest issue for our kids, and many adults, is that money has become invisible.
It was not many decades ago that parents brought home their pay in a brown envelope. Dinosaurs like me remember those days. My very first job in the money industry paid me $13,000 a year. This meant that after tax I had about $420 in my fortnightly envelope.
Given there were no broadly available credit cards until Bankcard in 1980, this system led to a clear understanding of money. I put the $420 in my wallet, handed over my fortnightly rent, popped my kitty money into our shared house ice-cream container on the fridge and applied the balance to beers and general entertainment.
If you are wondering about my mobile phone plan or car expenses, there was no issue here. Mobile phones did not exist and I had no car - my pushbike and the bus were just fine. This simple system made money easy. If I ran out before the next pay packet, I just went home and used free stuff, like the beach. It taught me to live on what I had.
You all know where this is going. First, money from work or an allowance mysteriously turns up in your bank account. Direct debits and so on see it mysteriously disappear.
But the really bad bit is the credit card limit, which allows us to spend money we are yet to earn. If that gets out of control, we can get another one. Or maybe a personal loan to pay off the cards.
As we tend not to change our behaviour, a year later many people have a personal loan and the cards are maxed out again. All of this is exacerbated by life being a lot more interesting. Subscription TV, data plans, reasonably cheap overseas travel and some very good coffee in most places, plus a warm muffin, make it very easy to spend.
So the challenge for parents, many of whom are struggling with the new world of money, is to teach the kids the basics when it is mainly electronic transfers and pieces of plastic.
This is a very abstract experience for kids. Good old cash could be seen and felt and when it was gone it was gone.
In this modern world, the key thing for parents is to make money real. This means that, from an early age, kids should be included in conversations about money as a part of everyday life.
"We can't afford it" is an answer that kids, as they grow up, will understand. We all need to learn this concept.
But there is more to be learnt from a simple statement at the right time, which I suggest is not in a shop.
A valuable conversation can be had about the family budget. That certain money comes in and there are fixed bills to pay.
The leftover money provides choices, which could be a dinner out or the movies or big items such as a new car or a holiday.
Parents do not need to be "perfect" with money in the eyes of the kids.
Our money mistakes are really valuable lessons and the ways we resolve them are more powerful than classroom learning, providing of course we share these with our kids in an age-appropriate fashion.
The world of money is dramatically different, complex and fast moving. So a combination of home learning and formal education is clearly the way to go.
Speaking of which, our 22-year-old daughter, our youngest, is home for dinner tonight. I am keen to show her an online scam I got via email today. The sharing and learning never stop.