So it was encouraging to hear that financial education has become a political talking point ahead of this year’s election. Both Labour and National are promising to deliver compulsory financial literacy classes as part of the school curriculum.
Labour’s proposed financial literacy programme would include the basics of budgeting, financial concepts and how to be good with money. It would also include explanations of interest rates, retirement savings, insurance, debt and borrowing.
And when Prime Minister Chris Hipkins said “it shouldn’t matter what circumstances you were born into, you should still be able to learn concepts to help you”, he was right. Improved financial literacy can only be a good thing for New Zealand.
With the country in a recession, New Zealanders are facing both ballooning debt and a legacy of poor saving. The average household debt in New Zealand is now more than 170% of gross household income. This is higher than the United Kingdom (133%), Australia (113%) or Ireland (96%).
And yet, researchers remain divided over whether financial education can actually have a positive impact on financial behaviour in the long term. In New Zealand and elsewhere, it seems factors closer to home have a greater influence on a person’s financial literacy than anything learned at school.
And when Prime Minister Chris Hipkins said “it shouldn’t matter what circumstances you were born into, you should still be able to learn concepts to help you”, he was right. Improved financial literacy can only be a good thing for New Zealand.
With the country in a recession, New Zealanders are facing both ballooning debt and a legacy of poor saving. The average household debt in New Zealand is now more than 170% of gross household income. This is higher than the United Kingdom (133%), Australia (113%) or Ireland (96%).
And yet, researchers remain divided over whether financial education can actually have a positive impact on financial behaviour in the long term. In New Zealand and elsewhere, it seems factors closer to home have a greater influence on a person’s financial literacy than anything learned at school.
Education, borrowing and debt
One 2014 meta-analysis of 188 research papers and articles concluded financial literacy interventions had a positive impact on increasing savings, but had no impact on reducing loan defaults.
A second analysis of 126 studies, published in 2017, found financial education positively affected financial behaviour – but this had limits for lower-income families. Much like the earlier study, the researchers found borrowing behaviour was more difficult to change with formal education than saving behaviour.
An important caveat is that these analyses measured the short-term response to hypothetical questions, not long-term behaviour.
But even when examining the impact of financial education on short-term behaviour, researchers found it was difficult to influence how people handled debt. Compulsory financial education did not improve the likelihood of getting into debt, or the likelihood of defaulting on loans.
Home and financial knowledge
In his famous work on social learning theory, psychologist Albert Bandurra proposed that observation and modelling play a primary role in how and why people learn. They are particularly relevant to the development of financial attitudes, confidence and behaviour.
Specifically, young people learn from the financial behaviour modelled by their parents, discussions about money in the home, and from receiving pocket money.
It has been suggested the differences in how money and finances are dealt with in the home are linked to why women generally score lower on financial literacy quizzes, as do people from lower socio-economic backgrounds.
Parents’ education and their financial sophistication – whether they have stocks, for example – have been shown to affect their offspring’s financial literacy. Women are also found to have lower financial confidence, even when they have the right knowledge.
In a New Zealand study of over 1,200 young people aged 14 and 15, the age of the first financial discussion between parent and child was found to be an important influence on future financial knowledge, attitudes and intentions.
The study found boys, on average, had their first financial discussion in the home at a younger age than girls. The age at which these initial discussions happen influence a person’s financial literacy levels at tertiary education age and beyond, even accounting for other demographic variables.
These findings suggest the way parents talk and manage finances in the home may be subject to a gender bias, contributing to different levels of financial literacy – and confidence – between girls and boys.
So, as we consider adding financial education to New Zealand’s curriculum, it’s important to consider all of the factors that will feed into a student’s money literacy – and not just focus on test results in a classroom setting.
Stephen Agnew, Senior Lecturer of Economics, University of Canterbury. This article is republished from The Conversation under a Creative Commons license. Read the original article
2 comments:
How long does the welfare state have to carry on before we finally wake up that it’s not working or producing the desired results?
Most of our problems start in the home and we’ve all seen how dysfunctional home life too often percolates through the generations. In conjunction with an education system that appears in all-but free-fall, far too many of our young are leaving school not only lacking literacy and numeracy skills, but they’re also lacking most of the other basics to lead useful and productive lives.
The State is now providing many of our school children with their lunches. If their parent (and yes, in far too many instances it’s only one of them) can’t successfully have the financial and organisational wherewithal to provide just that, what do we really expect the outcome will be for goodness’ sake? Rather than being proud of the delivery of so many school lunches, our government should be hanging its head in shame.
Yes, our children should be taught financial literacy, but they need the basics of literacy and numeracy first and foremost. But in addition to that financial literacy, they also need to understand things like personal self-control, well-being and lifestyle choices, basic societal ethics etc., – essentially the rules of life. Too many come from broken homes where welfare dependency rules and where they live day to day little better than animals who do nothing to improve, yet alone even have the capability and motivation to maintain their living conditions.
So yes, Stephen, I agree it's not just a simple fix to address one issue like financial literacy. If we want success there's a raft of changes to be made and it will take years to sort, but sort it we must.
I agree with anonymous that education begins in the home. But failing that, ,since so many homes are dysfunctional then schools should be places that supplement home deficiencies. But that is just not happening thanks to the prevailing ideology of Progressive Education seeped in sociology and socialism.
Discipline , correction of work, work ethic, social responsibility , direct instruction, and other teaching methods that worked in the past have been replaced with constructivism ( teach yourself), concern for self esteem, and entitlement.
The welfare state depends on responsible,literate and numerate citizens who can be and desire to be independent individuals with a strong work ethic. Our education has not only been destroyed but pulled down society with it.
For example even tertiary students, now have trouble with percentages. You can be given financial advice but lacking a basic skill like that largely cancels out the advice.
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