Tamsyn Parker

Money Editor for NZ Herald

Financial education 'must be a priority'

Highly educated people are not necessarily financially literate. Photo / Thinkstock
Highly educated people are not necessarily financially literate. Photo / Thinkstock

New Zealand needs to prioritise financial literacy in all levels of education, in the workplace and at home if it wants to help prevent financial disasters, says the head of a personal finance initiative.

Pushpa Wood, the new director of the Centre for Personal Finance Education - a joint venture between Massey University and Westpac Bank - said the collapse of the finance company sector had been a rude awakening.

"It was a shock to people's systems," Wood said. "They thought they knew how to invest."

But New Zealand was still not taking financial literacy seriously enough.

"Until we make it a priority at all levels of education, and employment and family and in the home, we have got a long way to go."

Wood said problems with financial literacy could not be attributed to any one section of society.

"You can have very highly educated people that are not financially literate."

She said if people could not read or write they could take a letter to someone to read for them, but it was much harder to show your finances to someone and ask for help.

Wood, who previously worked as education officer at the Retirement Commission, said financial literacy could be taught from as young as two years of age.

It was important to teach people about how to prioritise their spending, how to save up for something, and how to distinguish between a need and a want.

"We need to teach people simple things like they don't need to go into debt," she said.

"Or if they are going to ask, 'Is it going to be productive or something that will hang around my neck for the rest of my life?"'

Wood said the most common excuses she got from people were: "I haven't got any money" or "I'm so far in debt why should I worry?".

But Wood said people in debt needed to figure out how to stop getting in deeper. Even saving just $5 a week could make a difference.

Simple concepts such as keeping a spending diary could help people see where their money was going.

"We need to normalise financial literacy rather than making it a stigma."

The centre will launch a series of certificate courses in July to help improve literacy and to inform those who want to teach literacy.

Wood said the courses would cover budgeting and debt management, teach ways to make the most of the banking system, what the risks were in investing, and diversification.

Most courses did not have any pre-requisites and could be studied online.

The basic courses will cost less than $400 and run for around eight weeks.

EYE ON MONEY

Researchers are about to get an insight into how young adults make financial decisions.

The Centre for Personal Finance Education, a joint Massey University and Westpac Bank project, has launched a study that will follow 300 people between 18 and 20 years of age during the next 20 years.

Centre director Pushpa Wood said the interviews would start in the next month and the test subjects would be re-interviewed every five years.

She said the research aimed to find out what led people to make financial decisions.

"Then we will be able to work towards influencing the right decisions."

Wood said the study would be the first of its kind in this country.

"The initial findings will be published and serve as baseline data," she said. "We have a lot of anecdotal stories about young people but we have got to get hard evidence."

- NZ Herald

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