Where is the Financial Education in Our Schools?

Opinion piece

Nathan Cuthbertson

Looking back on my secondary education I notice a glaring gap - financial education. This is woefully mismanaged to the point of travesty in today’s education system. Defined as the ability to use financial tools to suit one’s own goals, financial literacy includes topics such as budgeting, saving, or investing as well as the knowledge of risk, understanding credit and debit, and how to plan. The benefits of educating students at an early age in financial literacy cannot be understated. All our lives, we as consumers are told to spend. Governments use stimulus packages to stir the economy. We live in a materialistic and consumerist culture where consumption and instant gratification is the goal. We must work long hours each day, to pay for things that we really do not need. We are taught bad spending habits from the day we are born. Savings and investments are worth far more overall than spending and excess consumption. A survey conducted by ME Bank found that 40% of people wish that they had learnt more about financial education growing up. The same survey demonstrated a link between people who were taught about money as a child and their financial wellness as an adult. Of those that were taught about money as a child, 74% claimed that they were effective savers. Of the respondents that received little or no financial education, only 43% reported themselves as financially comfortable. As a recent graduate of the Western Australian high school system, I can personally attest to the lack of any real financial education. Students are not taught budgeting or investing. Students are not taught how financial risk operates, or what the difference is between variable or fixed rate loans. They are not taught how to calculate whether we can afford the repayments on a loan. It is these essential financial tools that have not been communicated to those who need it most. Financial literacy also has a deep impact on mental and physical health. Studies have shown

that financial health is intricately linked with wellbeing. Likewise, it has been shown to reduce stress and anxiety, along with their physical manifestations of sleep loss and raised blood pressure. It has been reported in the US that 70% of people found that increased financial health had a positive impact on their physical health. A study conducted in 2013 found that one of the leading causes of poor financial wellbeing and likewise financial stress was financial illiteracy. The ability to afford holidays, leisure activities, retirement, or being able to spend time with family and friends instead of working - will raise the quality of life and improve mental and physical health. Furthermore, the benefits to society and the economy cannot be overlooked. Financial literacy and improved financial health decreases reliance on social services and welfare. By having sound savings and investments, individuals are less likely to use pensions and welfare payments, because they can self-fund retirement and their own lifestyles. This can help to reduce government expenditure and therefore reduce taxation and public debt. Conversely, the increase in understanding credit and loans will afford people the ability to purchase houses, cars, and other assets, boosting the economy. Not to mention that a market economy will function much more effectively if consumers understand risks and seek to maximise their returns around it. Why is financial literacy not taught well in schools? The simple answer may be apathy, but I believe (perhaps quite cynically) that governments simply do not want a financially independent and stable population. They do not want people saving. The GDP model which is commonly used for measuring the output of an economy comprises consumption as an important component. Under the same model, if the population were to substantially reduce consumption and instead save, aggregate demand would fall, and thus economic growth may decline, or the economy may go into recession. Furthermore, if a population is financially selfsufficient, then the need for government services will fall. As individuals’ wealth increases, health and wellbeing rises. Governments would not be needed to provide as many services such as healthcare, regulation, and welfare; thus reducing government power. Politicians and bureaucrats in their own self-interest to preserve power, prevent the public from becoming financially literate. Financial education could revolutionise our economy. It has the power to help people with their personal finance and improve the quality of life for millions of Australians. Yet it is not taught. This is perhaps the greatest failure of previous generations. In their apathy towards financial education, they have left the future generations to suffer.