Why It Pays To Start Financial Education Early

By Scott Phillips | More Articles by Scott Phillips

When my son, Jack, aged eight, wanted an ice cream from the kiosk a few weeks back – the cost being $3.80 (yes, wow!) – I said to him, “if you can tell me how much change you’ll get from a $10 note, then I’m happy to buy it for you”. To which he replied, “don’t be silly dad, you don’t need to know that when you use payWave!”

Which made me think: is our next generation missing out on the vital learnings in financial literacy? Because kids today need to navigate a world in which finance and financial products are becoming increasingly complex.

Today’s new normal is a society where we have cashless transactions – including Bpay, Paypass, Apple Pay and PayPal, not to mention numerous credit cards to buy anything – while at the same time we continue to rack up huge levels of debt to pay for Australian housing.

Coincidently, I attended a briefing by netwealth (a leading independent provider of superannuation products where Montgomery funds can be accessed) and they were supporting an innovative way to develop financial literacy from a young age in the classroom. Known as Banqer, the program is a virtual classroom economy where kids can learn to earn, save, spend and invest their money in a safe and engaging way. Developed in NZ, it now has over 30,000 kids in the program.

Teachers can use the program’s reward system to help motivate kids, encouraging development and confidence. Kids learn valuable life skills by managing the rental of their desks and paying for class privileges. Teachers can also trigger virtual earthquakes (this was developed in NZ) or sudden interest rate rises to emphasise the benefits of insurance and to demonstrate the importance of savings relative to debt.

Kids in Year 1 to Year 5 learn money management and personal finance topics such as income, savings and interest while Years 6 and 7 learn about topics such as mortgages, rent, paying tax, and paying excesses on insurance claims.

Providing kids with a practical and fun way to learn lifelong concepts about money is not only a smart but vital skill to develop, and like the law of compounding, the sooner you get started the more beneficial it is.

Netwealth is offering 15,000 fully funded programs to Australian kids. Should you want to get your kids involved then you can find out more information here.