Ryan Bridge: The path to improving financial literacy

I see ACT is flying a kite on free money for school kids.

Which sounds odd given the party's aversion to free lunches.

Seymour's talking about giving each Year 11 student, 5th form, $500 each to invest. It'd cost $30 million a year and could be funded via the KiwiSaver subsidy.

They'd be able to invest in a term deposit, managed fund, and equities. It'd be a controlled fund so they couldn't go nuts or withdraw, but they might learn something.

Trump's done something similar in the US, though with the help of private capital.

This is a great way to get young people interested in investing and learning about investing.

But isn't there an inherent problem with this? Giving them free money doesn't teach them the value of earning it in the first place, which I would have thought was central to ACT's philosophy on life.

I spoke to Fraser Whineray, former Mercury boss, a few months back about his idea for KiwiSaver 2.0.

He reckons we should overhaul KiwiSaver and give every newborn Kiwi kid $5,000 instead of giving adults the $250-odd per year they currently get from the Government.

With compounding returns, the $5 grand becomes $20,000 by age 18.

The lesson is pretty simple, time in the stock market equals money in the bank.

Whether ACT's or Fraser's approach is better depends on how you view the trade-offs.

But there's no doubt in my mind that they're both on the right path. We need to improve financial literacy not just for the sake of Kiwi kids, but the country.

Ryan Bridge is a New Zealand broadcaster who has worked on many current affairs television and radio shows. He currently hosts Newstalk ZB's Early Edition - where this article was sourced.