Finance Finance News Financial literacy education in RBA’s and ASIC’s sights

Financial literacy education in RBA’s and ASIC’s sights

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Payday lending can lead to further financial strife. Photo: Getty
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There are certain things in life we tend to procrastinate about more than others, like drawing up a yearly household budget or filling out our tax returns.

The corporate watchdog, the Australian Securities and Investments Commission (ASIC), believes that is because they are too daunting for many.

ASIC is sounding the alarm about the number of Australians who find dealing with money overwhelming.

The Financial Capability website, which is managed by the ASIC, shows too many Australians feel out of their depth when faced with basic financial concepts and decisions.

Just 35 per cent of Australians know the exact value of their super; 40 per cent understand the concept of diversification (asset allocation within an investment portfolio) and 59 per cent pay their credit card balance in full every month

ASIC says women are disproportionately represented in these statistics.

Its Australian Financial Attitudes and Behaviour Tracker survey has found 41 per cent of women find “dealing with money stressful and overwhelming”.

“That’s not good enough,” Laura Higgins from ASIC’s Financial Capability team said.

“When you feel overwhelmed, and it feels like too much, you aren’t going to necessarily end up with the best products and services for your family.”

Ms Higgins however wants to draw a distinction between feeling overwhelmed by financial decisions, and making good decisions about money.

“Just because they don’t feel confident doesn’t mean they don’t have a budget, and aren’t aware of key superannuation concepts, but it might mean that they don’t have the confidence to challenge their bank on things, or question advice they’ve been given from a financial adviser,” she explained.

Financial literacy empowers consumers

Levels of financial literacy have emerged several times during the banking royal commission.

It is generally understood higher levels of financial literacy put consumers in a more owerful bargaining position when dealing with banks and other financial institutions.

ASIC argues the best place to begin improving levels of financial literacy is in high schools.

“How does that align with what we know about mathematics and economics and what conversations women feel they can be a part of? It’s absolutely connected,” Ms Higgins said.

“That’s why having women studying economics is really important.”

That is also where another member of the Council of Financial Regulators, the Reserve Bank, comes in.

The RBA is sending its staff into schools across the country, advocating for more economics classes and encouraging students to get more involved in the financial news cycle, because, it believes, more financial education is the key to solving the problem.

“It helps you understand the wider world,” Reserve Bank assistant governor Luci Ellis told RN Breakfast.

“In the early 1990s over 90 per cent of high schools were offering economics as a subject, now only about 40 per cent of high schools offer economics as a subject.”

“In terms of the number of students studying economics to HSC level, it was around about 40 per cent back in the early 1990s. Now it’s more like 10 per cent, and that’s partly because fewer schools are offering it.”

In 1991, economics was the third-most-popular subject — behind the big two, English and mathematics — with almost 20,000 students enrolled.

Last year, economics barely limped into the top 25, with little more than 5000 learning the basics of supply, demand and prices.