Poor financial literacy leaves workers stuck on debt treadmill


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We live in a time where education is highly valued, where interns starting out hold degrees with honours and high distinctions and even masters level qualifications.

We see private schools boasting academic excellence and charging fees in the realm of tens of thousands of dollars for education, yet we have this phenomenon in Australia of poor levels of financial literacy. I am still bewildered at how or why this is acceptable, given the high value our society places on knowledge.

In a time with so many talented, skilled and successful individuals who are achieving highly in their chosen profession, it is alarming that something as essential and fundamental as financial literacy seems limited in its existence for so many.

financial literacy education debt

Most individuals understand the basic skill set of how to earn money, through a salaried position or self-employment but it would be accurate to say that only a minority understand that building wealth is a completely different skill set.

Even when those who have the distinction that building wealth is separate to earning money, few understand the mechanics of how to drive their own wealth.

It is only in the past few years that "a version" of financial literacy has become part of the national academic frame work and even then it is left to the individual states in the educational space to implement and monitor it as they choose.

The lack of basic understanding creates low confidence and with that comes fear, so for many not doing anything rather than making a big financial mistake becomes the holding pattern.

Industry doesn't help, with many financial planners and financial gurus making financial literacy seem like a complicated science that can only be achieved by having them do it for you.

Then we are faced with a myriad conflicting expert views portrayed in the media, it seems that on a good day economists, economic forecasters, share experts and property gurus struggle to agree on anything much, further adding to the confusion of many Australians.

So for a busy adult, who is consumed by work life, a professional career, running a family and trying to maintain some sense of self - financial literacy is not the obvious priority people are looking to schedule into their already hectic lives.

Despite the consequences of poor financial literacy with many being so stuck on the debt treadmill, the daily grind, and working harder that they never stop to consider financial literacy as a definite way out of their current working-for-money struggle.

For those that decide to take some type of action there is no shortage of guru-lead events, seminars and workshops promising answers on how to build wealth. The issue with this is there is a key step that has been missed - "financial literacy".

How one is supposed to go from no or minimal levels of financial literacy to jumping into a major investment is simply nonsensical. Also, they assume that the individual reaching out for help should employ no self-responsibility or have no knowledge but rather just trust the guru or process being sold to them.

I completely reject this approach as it undermines an individual's natural intelligence to understand information when presented to them in a simple way. It negates their ability to play an active role in their own financial future, and it requires them to relinquish all power to the expert of the day.

It's taken more than two decades in the financial services industry and property investment space and having spent thousands of hours with clients listening to their stories to really understand what the key issue is.

It has only been in recent years that I finally was able to isolate financial literacy or better the lack of it as the key factor impacting the quality of lives of so many Australians. The reality is most people are doing the absolute best they know how to with the level of knowledge they have regardless of whether they earn $40,000 per year or $250,000 per year.

The notion that the financial services industry simply proposes going to see an expert and paying them to do something for you that you do not understand is astonishing.

Again, it's a methodology that I reject; because it doesn't address the core issue of poor financial literacy which goes on to have an intergenerational impact in our society. It's not uncommon that we will see children from poor families continue that way of life and children from rich families go on to make money.

The past 12 months have confirmed that the insights and research I have done over two decades in the financial industry that financial literacy is at the core of the problem impacting people's quality of life and ability to build wealth.

I am always greatly humbled when I am presenting at our financial literacy events for men and women, to see smart, intelligent, successful and accomplished people rate themselves on average a five out of 10 for their financial literacy.

No matter what area of life it is, we usually are not motivated to take action or find a solution to something if we have no working knowledge of it or cannot understand it even when we seek professional help. And as such sadly the cycle continues from one generation to the next.

I passionately believe the remedy lies in financial literacy for adults as much as for young Australians, our financial literacy workshops have demonstrated time and time again, that anyone is a hundred times more likely to take action to improve the quality of their lives financially when they understand what it is they are meant to be doing and how to do it.

As we all know, it is important that we create wealth for our retirement, yet too many ignore this fact simply because of a lack of understanding the scope that's available to them.

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Marion Mays is CEO of wealth advocacy firm Thalia Stanley Group..