Fairfax columnist and personal finance expert Nicole Pedersen-McKinnon responds to ASIC's call for comments on the National Financial Literacy Strategy.
Dear Australian Securities and Investments Commission,
Please consider this my 2??-worth on your call for comments on the National Financial Literacy Strategy, which began when the wonderful Paul Clitheroe was appointed head of a taskforce in 2004.
Financial literacy can really be thought of as money smarts and it's make-or-break stuff, as the graphic shows. Two out of five Aussies say money mistakes they made in their 20s haunted them into their 30s and even 40s, according to a Get Credit Score survey.
Forget my writings or my TV commentary; it's my presenting work in high schools that gets the biggest reaction. "Oh, I wish I'd had that," virtually every adult I speak to says. Then: "My son/daughter has no idea about money."
And I can attest jaws hit the ground when I tell students they're more at risk of ruining their credit rating than their parents, thanks to comprehensive credit reporting ??? if they put a gap year on a credit card and pay just the minimum, it could take them 44 years to clear ??? that they might pay $100,000 for a university degree (but HECS-HELP is the only form of debt I support).
How their eyes light up, though, when I point out that as overwhelmed and under-prepared as many feel, they've an asset their parents don't have: time. The magic of compounding means investing just $6 a day from age 15 at an 8 per cent return will make anyone a millionaire at 60 ??? with $900,000 "free".
But once we leave those school gates, it's a steep learning curve indeed (witness how almost 30,000 adult Fairfax Media readers fared on the basic money smarts pre-test I give school kids). And the rise of fintech and financial innovation increasingly targeted at young people, ups the ante on the threats as well as the opportunities.
It is genuinely harder for this generation to learn about money than it was for us. Fairly soon the physical thing won't exist ??? and they've been using their student IDs like a spend-and-forget credit card at the tuckshop for years.
So it's completely valid that Laura Higgins, ASIC's new senior executive leader for financial capability and a former teacher, cites helping get money instruction throughout the national curriculum from 2015 as her proudest achievement.
"It was a huge effort to make that happen but what that means now is that financial literacy is not an extra in schools, it's embedded," Higgins told me.
Elements of money and its management now occur not in just maths, as you might expect, but into science and English.
"It is there [in different subjects] but that doesn't mean when parents ask their child about school, they'll say 'we learnt financial literacy'," she says.
Equipping our graduates with real-world financial survival skills is personal for Higgins. "My family didn't make it from pay cheque to pay cheque. My Dad got paid on a Thursday and we would run out of milk on a Monday," she confides.
"So I'm big on the importance of empowering people with information and building confidence to make decisions."
Recommendation No. 1: Promote the progress!
The trouble is, for all the amazing work of Higgins, Clitheroe and many others, too few teachers know about the tremendous resources on moneysmart.gov.au - ready-to-go lesson plans mapped to the curriculum.
These need more promotion "on the ground" (and there's only one of me!)
Invariably when I talk directly to educators or post anything on social media about the teaching resources, one teacher will also give me a serve like: "I don't have enough time to teach my subject as it is - surely this is the parents' responsibility!"
And it's a fair point. So my next suggestion is ???
Recommendation No. 2: Resources for role models
Parents need independent, engaging multimedia resources to help them give their children a solid financial foundation. Let's face it, just because you're a mum or dad doesn't mean you're not also among the 36 per cent of Australians who find dealing with money stressful and overwhelming (from ASIC's Australian Financial Attitudes and Behaviour Tracker).
Higgins tells a poignant story about how her family's mail, because it was usually bills, would go on top of the fridge. "I can't have things on my fridge. That's the anxiety spot," she explains of the legacy of a challenged money start.
But that's not to say parents need lots of money to model good money management. "Often people with very little money can do a lot with little money," she says.
Sure, adults can use the great information on MoneySmart.gov.au to give themselves more financial confidence, but there's nothing on there to help them communicate life-changing money lessons to their kids.
Recommendation No. 3: A code of conduct with kids
This brings me to an awkward one. It is wonderful that official financial literacy efforts embrace and encourage every individual and organisation that wants to help.
I believe it takes a village to raise a money-smart child. However, where our susceptible, brand-impressionable children are involved, that village needs a code of ethics.
This one's personal to me and it's why I now do what I do in high schools.
My son rushed home from year 1 one day, all excited about the nice man from the bank who'd come to talk to him about "Mummy money stuff".
"Which bank, darling?" I (needn't have) asked.
"I don't know. Oh - but they have this awesome logo that's black and this super special type of yellow that no other company in the world is allowed to have."
That's not independent financial education - it's brand brainwashing. It also speaks to the reason so much funding is allocated to this "education" initiative: the latest reading of my Interest Integrity Index shows lifetime loyalty to any Big 4 bank will cost a student an excess $123,000 in interest.
The words "shop around" remain the secret (literally in these schools) to financial success.
Recommendation No. 4: Fund our future
I commend the government for continuing the (it should be noted traditionally bipartisan) budgetary support for financial capability. Because for us, our children and our economy, this is too important to ignore. And for all the wonderful progress made, more needs to be done.
In particular, Higgins has some great ideas about how to help 18 to 22-year-olds and single parents.
Hopefully, ASIC, my thoughts spur other interested individuals and entities to also make a submission to the National Financial Literacy Strategy consultation - they have until November 17.