Kiwis don’t know much about Finance. Who would have thought?

September 7, 2009 by
Filed under: Economics, General Budgeting, Property & General Investing, Retirement, Pensions and Kiwisaver 

Today is apparently the start of Financial Awareness week. Being made aware of it before it happened might have been an idea – but better late than never. And shock, horror – there’s an article in the Dom Post today about how little Kiwi school children know about financial stuff.

A questionnaire commissioned by the Young Enterprise Trust and tackled by hundreds of secondary school students has provided a damning indictment of financial knowledge levels among New Zealand’s future workers.

Despite the survey being packed with basic themes like compound interest, income tax and GST, returned forms were littered with an alarming number of mistakes only half managed to register eight correct answers out of 40 questions.

Errm – did we need a survey to tell us this? How exactly were they supposed to know the answers about income tax and GST? Who the hell cares when they are at school? It’s just not relevant. Ok, Compound interest is – because it shows you that saving is good and debt is bad, and besides – it should be in the Maths curriculum anyway.
But knowing GST rates isn’t something a school kid really needs to understand. Learning how to handle money: save a bit, spend a bit and keep on eye on your finances – that’s what they need to learn.

It’s a bit worrying that only half managed to get 20% right. Statistically – if you guess at the answers (multi-choice out of 4 choices) everyone should have got 25% correct.

The questions that registered the highest number of incorrect answers centred on credit card interest, the types of investment that return the highest growth over time, and dollar cost averaging.

Now, credit card interest – yep – lets sit down and make sure every student leaves school knowing exactly how bad credit cards can be, and how they are seen as easy prey by the credit card companies once they leave school. This is in my opinion vitally important for them to grasp. And an understanding of investment returns is not a bad idea. I didn’t know what Dollar Cost Averaging was until about 4 years ago when I went to an investment seminar here in New Zealand. I had made use of it in the form of investing in an Endowment fund in the UK, but hadn’t got the foggiest idea that this is what I was doing – or why it was a good thing.

The article is actually rather good, and makes some good points about how we really need to start financial learning at school age. Unfortunately it finishes with whacking adult Kiwis over the head for insisting on investing in Property (which as you know is not actually the case at all). They seem to think we do it because we are too stupid to invest in shares, rather than because we are actually semi-intelligent and weighed up the risks and the benefits and worked out which was better for us. I know that’s what I did. But only after I had the basics sorted. Theres no point in learning about investing if every month you continue to spend more than you earn. Let’s teach people this first.

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Related posts:

  1. Are Kiwis really obsessed with Property?
  2. You don’t save when you have debts to pay.
  3. Why are Credit Cards still charging such high interest rates in New Zealand?
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Comments

3 Comments on Kiwis don’t know much about Finance. Who would have thought?

  1. Pam on Mon, 7th Sep 2009 7:43 pm

    2. I agree. If kids aren’t taught the basics of finance at school (including income tax and GST) – where are they supposed to learn it? I had what I consider an excellent education, and I pick things up pretty quick, but I was not taught about income tax or GST or investing or credit cards or anything that might be useful in the future. So, I made a few silly mistakes upon leaving home, that could easily have been avoided with a one day lesson at school. Saving up a bond to rent a flat for example, and what is rent in advance actually for? There are some basic things that kids are not being taught in schools – why?

  2. Hubby on Tue, 8th Sep 2009 8:02 pm

    3. I think the whole curriculum is missing the basic financial literacy. After all how many maths lessons did we have about the optimum angle at which to dig a trench with x people, y shovels, and z buckets to take the dirt away. Jeeeps! – use a bloody JCB and get the job done in 5 minutes.
    Instead teaching kids (or adults for that matter) some basic money management, terminology etc. and we’d all be better off.
    Although we shouldn’t probably emphasise that chimpanzee’s randomly picking answers would have scored better and (statistically) appeared to have more financial acumen.

  3. Avalon on Tue, 8th Sep 2009 9:51 pm

    4. Actually, I think the Chimpanzee thing makes the point quite well.

    You are better off guessing than thinking you know about money.

    If you don’t know – learn :)

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