“One can best prepare themselves for the economic future by investing in your own education. If you study hard and learn at a young age, you will be in the best circumstances to secure your future.” – Warren Buffett
The world of money can be confusing. If you’ve ever wished you learned more about money in school… you would be among the ranks of thousands of Queenslanders, wishing they had more financial confidence.
Building that confidence comes from gaining a deeper understanding of financial services and products such as mortgages, personal loans, credit cards and Buy-Now-Pay Later services.
Financial education is becoming increasingly necessary in our daily lives; and not just for investors. Anyone who wants to get ahead, save for retirement and get the most out of life now needs a solid grasp of finances.
Education From a Young Age is Essential
According to the OECD (Organisation for Economic Co-operation and Development), financial education should start at school for people to be well-educated on personal finance as soon as possible.
Warren Buffett, widely considered to be the top investor in history, has famously declared that the biggest mistake parents make when it comes to teaching their kids about money is to “wait until their kids are in their teens before starting to talk about managing money when they could be starting when their kids are in preschool.”
Young people are engaging with money and financial services from a far earlier age, and are the prime targets of corporate advertising and marketing. The purchasing power of young consumers is well-recognised, and young Australians are increasingly targeted by different forms of marketing practices and commercial pressures in order to push them to purchase more and more frequently.
This year, ASIC is establishing a national expert group on youth financial wellbeing to help identify the most relevant and significant issues impacting young people’s financial lives.
This comes after the Organisation for Economic Co-operation and Development (OECD) released the second research study conducted by their Programme for International Student Assessment (PISA), looking at the financial literacy levels of 15-year-old students from around the world.
While 15% of the participating Australian students had financial literacy levels above the average of the other participating countries, 20%, according to PISA, do not even reach the baseline proficiency.
Since PISA’s 2012 study, there has been a 9% increase in those failing to reach basic proficiency.
For most people, the biggest problem they face in embracing financial education is the gap between what they think they know, and what they really know.
A recent study by the Financial Basics Foundation surveying 1,100 Australian high school students also found major misunderstandings about managing credit card debt.
Students were asked how long it would take to pay off a $2,000 debt on a credit card with an 18% p/a interest rate, paying only the minimum repayments. Over half the students said it would take less than three years to pay off the debt – it would actually take more than 15.
How Finance Education Could Change Lives
Poor financial decisions can have a drastic and long-lasting impact on individuals, families and dependents. There are many steps and solutions to becoming more financially aware and improving your own financial wellbeing.
The first step to achieving any of this is to understand personal finances and basic economics. For instance, knowing how to set a budget, where your money comes in from (and when), what your expenses are, and where/how much can you cut on your expenses.