Learning finances

Jeremy Tauri.

Wouldn't it be good if, when young people left school, they not only had a good numeracy and literacy but had a high level of financial literacy, too?

I am still amazed at the lack of basic knowledge that seems to be quite commonplace. People will take out loans without inquiring as to the interest rate.

They will sign up for a 'cheap' weekly payment for something, not considering the number of weeks they will have to pay that for or how much more that is than they would have to spend if they paid cash upfront. Many people don't know how compound interest works for (or against) them.

In one case I came across, someone did not realise that the $1000 balance available to them on their credit card was not actually their money.

If kids were given a few lessons in the basics of money management at school, they would pay themselves off many times over.

We would not have families going without because their money is being swallowed up by expensive loans, or young people being saddled by debts they don't understand but which will take them years to pay off. It's really common to hear people say: "Oh, I'm just not good with money."

But it is an important life skill. You might not be that great a driver but you learn how to do it well because it is something you need to get through life.

Money skills are the same. Financial literacy will help your family succeed, and dramatically improve the fortunes of businesses you are involved in, as a worker or an owner.

The Government and the Commission for Financial Capability are doing some good work here, and some private groups and businesses in the financial services sector are also pitching in.

If the next generation is more financially literate than the one before it, New Zealand as a whole would be better off.

- Jeremy Tauri is an associate at Plus Chartered Accountants.