The challenge of learning about money

14 minute read  
Date: 27 November 2017
Take outs:
  • Improving financial literacy requires addressing ‘human’ or behavioural factors that make doing the right thing a challenge.
  • Who should take the lead on financial literacy has always been debated, but the answer lies in a collaboration between government, regulators, schools and parents.
  • The issue of financial literacy is a numbers game which for the best results, requires the involvement of the majority.


Ironically, we are at our best in terms of financial literacy, just after a crisis.

According to the Chairman of the Australian Government Financial Literacy Board, Paul Clitheroe AM, this was the case after the Great Depression of 1929 to 1934, and in 2009, the year after the Global Financial Crisis, when our savings ratio increased and our use of expensive credit card debt fell dramatically.

The explanation for this goes something like this. Most Australians have no fear of food shortages or concerns over shelter, and have therefore become disconnected with any sense of saving for a rainy day or funding their future which can be easily put off.

A crisis reminds us of our essential needs and makes us more disciplined.

“Australians have a far better awareness today of the need to be good with money, but as our knowledge has risen, so has the complexity of our financial system,” says Clitheroe.

He adds: “However, the biggest challenge of all, is that we are humans.”

Financial literacy in Australia has become increasingly prominent over the past five years.

Australian Securities and Investments Commission (ASIC) published its first National Financial Literacy Strategy in 2011 and the ensuing Strategy for 2014-2017, gave Australia a national framework for action.

While schools, financial institutions, regulators and Government are working to improve financial literacy, it is a complex problem because it involves human behaviour, and is impacted by socioeconomic issues and lifestyle decisions.

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Why does financial literacy matter?

Yet financial literacy has the power to change people’s lives.

Some of the benefits of financial literacy include a society which has a financial plan, who knows what they earn and spend and understand risk and return.

Financial literate people can also recognise scams because they have developed an inbuilt radar that goes off when something looks too good to be true because it is.

The Financial Planning Association’s (FPA) CEO Dante De Gori says the rapid pace of innovation and growing sophistication of financial markets is creating many new financial products that can be complex and confusing, making it increasingly difficult for everyday consumers to evaluate their options.

Further, in an increasingly complex financial market, many consumers don’t have the knowledge, time or inclination to create their own plans.

In a 2015 study by Financial Planning Standards Board, most consumers reported that they felt challenged by their finances, with relatively few saying they were knowledgeable about financial matters or highly successful at sticking to their financial goals.

“We need to champion the cause of financial literacy in Australia because it is an everyday life skill that allows people to better understand their finances and to appropriately manage their financial outlook,” says De Gori.

Not just in Australia

Financial literacy is a global challenge.

“The definition of saving, a fundamental concept of financial literacy, is ‘postponing consumption’,” says Clitheroe.  “I don’t think too many of us are naturally good at this. I am certainly not.”

That said, the way our society is organised, means we are not really set up for success when it comes to financial literacy.

“In a consumer society, the opportunities to buy things are endless and we don’t even need our money, we just have to wave the plastic credit card,” says Clitheroe.

The disconnect we have with money, with the use of credit cards and direct debit, means often we don’t even see money. We have become a cashless society, easily out of touch with our finances.

Co-founder of Banqer, a digital financial literacy program for kids, Kendall Flutey says one of the main challenges with financial literacy is that nobody really knows who should own it.

“By this I mean, should parents teach these skills, should schools, or some third party?” she asks. “What we’ve seen happen as a result is that everybody has shied away from the responsibility, when in fact the answer is that all should be responsible with a collaborative approach.”

The Banqer program is a classroom financial literacy tool that teachers can integrate into their classes as they see fit. While Flutey says schools are a source of knowledge and simulation, parents and banks and financial institutions also have a role to play in improving financial literacy.

“The reason for this is that we can’t assume all parents have pre-existing financial knowledge. But the role parents can all play is encouraging conversations around money and helping their kids on their real-life financial journey. And then banks and other financial institutions can pick up the gauntlet by including education alongside their offerings.”

Flutey adds: “Once this is better understood we’ll start to see financial literacy solutions that work effectively together.”

In this way, Clitheroe says financial literacy is a numbers game which for the best results, requires the involvement of the majority.

“It’s hard to force feed financial literacy,” says Clitheroe. “We want people to self-support in conversations about money. This means parents, grandparents, at school, university and work. If enough of our ‘herd’ have these skills and pass them on daily, we can improve the ability of all.”

Challenges to financial literacy

Low levels of financial literacy are an issue that can be found in all sectors of the community – rich, poor, skilled and unskilled.

However, the challenges faced by individuals along the socioeconomic spectrum will differ.

For example, there may be lower interest from lower socioeconomic areas due to barriers such as lack of resources, access to devices/services and in some cases skills levels. Further, higher levels of financial literacy can be found in lower income families in terms of controlling spending and making careful decisions. Another very real challenge to financial literacy is English as a second language.

But it is also not uncommon for higher socio economic areas to fail to prioritise financial education.

“Our experience in Australia is that society in general is very concerned about financial literacy and very encouraging of our mission,” says Flutey, who first launched Banqer in New Zealand.

She says trying to improve financial literacy with kids in schools also has its challenges. Some teachers or administrators can be simply closed to new ways of doing things, and are also wary of the commercialisation of schooling.

She said another challenge is that a school may already use another financial education program that is less involved and curriculum aligned. For example, they may have a facilitator come in once a year for an hour.

“We counter this by reinforcing that we are an independent and unbiased financial education program that offers comprehensive and immersive financial learning, but it's difficult to convince someone to change position when they’re entrenched in their ways and do not know your offering well.”

Netwealth’s partnership with Banqer is aiming to help support 15,000 Australian kids.  This is being supported by the FPA, where schools introduced to Banqer by any of the FPA’s 13,000 members across Australia can access the service, as well as receive support from an FPA qualified financial planner. 

With one of the major barriers to financial education in schools being lack of confidence or experience teaching financial literacy, having an FPA member on the journey with the students and teachers largely increases the chances of success.

“This is a tangible way for interested members engaging positively with local schools to better increase financial literacy amongst children.”

There is also the opportunity to reach out to parents.

“With Banqer's new addition of the Parent Portal, parents are increasingly becoming a part of the Banqer journey as well, so planners may even go on to speak at specific parent/teacher evenings.”

Factors for success

To make a lasting impact in financial education it’s important to recognise it is not just about literacy rates, but also about establishing positive financial behaviours.

“Sound financial behaviours are the essential ingredient to making a real difference with both kids and adults alike,” said Flutey. 

“I think new ideas or initiatives fall over when we stop at improving literacy alone, as although knowledge is power, what we do with that knowledge, our financial actions will shape our outcomes.”

For this reason, Banqer does not only educate, but also offers financial experience for kids as well. This sees them managing their own personal finances (albeit with training wheels on) and reinforcing healthy behaviours every day, ready for application in the real world.

But let’s face it, money planning is not as exciting as planning a holiday, so being conscious of our money each day is the first step.

According to Clitheroe, providing information when people are most open to it or ready for it is also key.

“We do know people seek information when they need it, usually around a trigger point such as buying a home, marriage, divorce or death,” says Clitheroe. “We need to ensure they have a trusted source of information to go to.”

Challenges unique to Australia

Improving financial literacy requires a multi-faceted approach and sustained action over time to bring about gradual improvement.

In Australia, the fore mentioned National Financial Literacy Strategy 2014-17, led by ASIC, provides a practical framework to guide the action of stakeholders from the government, business, community and education sectors with an interest in improving the financial literacy of Australians.

Encouraging people to use impartial and appropriate guidance and tools at the point of decision-making is a core part of building their financial literacy.

Clitheroe says in this way, playing an important role in changing consumer behavior is ASIC's MoneySmart website, that offers free, independent guidance to all Australians on financial matters.

Of course, a great starting point for any financial literacy work is kids.

“It is particularly important for young people to develop financial literacy skills so that later in life they can make well informed financial decisions,” says Clitheroe.

However, there are several barriers to improving financial literacy in kids in Australia. These include a crowded education curriculum, competing demands on teachers and schools, lack of confidence on part of teachers and a general lack of awareness in the community about the importance of financial literacy.

When Banqer came to Australian earlier this year, it faced several challenges it didn’t face in New Zealand, the most obvious of which were curriculum related.

For example, New Zealand only has a national level curriculum, where Australia has state level as well. Additionally, the curriculum links are slightly more challenging as the New Zealand curriculum is more fluid and educator adaptable.

As such, Banqer has had to be adapt its approach to Australian schools.

“We’ve perceived greater restrictions on teachers in public schools that make it harder for them than their NZ counterparts to pick up Banqer on their own accord,” says Flutey. “Largely it appears programs or initiatives are directed from the principal level. This opposes the grass roots more “she’ll be right” attitude of New Zealand educators who have a lot of free reign to trial ideas of their own accord.”

The benefits of success

The OECD program for International Student Assessment (PISA) financial literacy assessment results report tells us around a fifth of 15 year olds in Australia do not have basic financial literacy, and it’s declining.

“An improvement in this score would be a great place for us to start measuring the success of financial literacy in our schools,” says De Gori.

Success in terms of financial literacy would minimise the likelihood of people being misled and facing financial problems/stress. We would also improve planning for retirement, participation in the financial markets, and improve borrowing behaviours.

At the societal level we’d see this translating into thriving communities and strong economic development. There would be more informed decisions that demanded a higher quality services encouraging competition and innovation in the market.

Kendall notes an Australian study from the Commonwealth Bank Foundation that states: “Increasing financial literacy of the least financially literate by 10% would add $6 billion per year to the Australian economy also creating 16,000 new jobs.”

“As you can see, although the path to success is complex and multifaceted, it is worthwhile, empowering individuals to make informed decisions early on and take control of their futures.”

To learn more about Banqer and the role Netwealth is playing to bring Banqer to 15,000 Australian school kids go to