Money is the blood flowing in the veins of every functioning society. For better or worse, money is vital for enabling and improving our civilised livelihoods. Understanding and practising money management is crucial for children and ideally, by instilling positive habits and attitudes in the early years, the skills developed will facilitate an easier transition into adulthood. In fact, incorporating more financial literacy into a child’s education could prove to be extremely beneficial, and profitable.
Financial literacy is all about awareness, knowledge, skills, attitudes and behaviours necessary for making sound financial decisions in real world situations. It encourages an essential understanding of basic economics, and an appreciation of the cost of living, budgeting, having financial goals, taxation, superannuation, banking, borrowing, investing, assessing financial products and developing strategies for earning incomes.
Financial literacy provides children with monetary knowledge and skills that will be used daily in guiding their financial decisions. It is especially important for young people in our modern technology era, as they are exposed to complex and risky financial options via the emergence of convenient online services and mobile phone apps providing buy now, pay later services and easy access to credit. Social media and TV ad campaigns are aggressively fuelling a ‘buy now, worry later’ attitude in young people, and the potential pitfalls need addressing through education.
Concerningly, research suggests many Australians lack financial literacy, particularly among young people. A survey in the University of Melbourne’s 2018 Household, Income and Labour Dynamics in Australia (HILDA) report – tracking more than 17,500 people in 9500 households – found young people under the age of 25 to be the least financially literate, with only 24% (just under 1 in 4) of participants correctly answering all five basic financial literacy questions. In a 2020 ABC article, in response to reports of thousands of Australians plunged into financial distress since the COVID-19 outbreak, Financial Basics Foundation Chair Brigid Leishman boldly claimed it was partly due to a lack of financial literacy education for young people.
The benefits of teaching children financial literacy are evident in Me Bank’s 2019 personal finance study, Childhood money moments matter, which interviewed over 1,000 people to understand the biggest influences on financial wellness. They found 74% of participants who received advice about money or were involved in money discussions when they were growing up described themselves as effective savers, and 64% as financially comfortable. They also found that 69% of participants who were taught more than they needed about managing money growing up claimed to be effective savers, and 71% as financially comfortable. Unsurprisingly, not being taught about managing money while growing up caused people to be less effective savers (48%) and less financially comfortable (43%). Overall, the study found 40% of Australian adults wished they’d been taught more about money as a child.
Young people who are less financially literate are more susceptible to poorer financial decisions, and research suggests the importance of teaching more financial literacy at younger ages. Lower financial literacy is associated with a time preference towards more present-oriented rather than future-focused decision making, and is associated with greater impulsiveness and slightly lower achievement motivation.
Running an eye over these numbers highlights that developing a practical mathematical ability is a crucial factor in growing effective financial skills. Several of ORIGO Education’s key resources assist in improving the financial literacy of children. For example, Fundamentals games are an easy and fun way for students to develop computational fluency. These engaging activities help differentiate instruction for any core maths program and students make meaningful maths connections before, during, and after each game.
Thinking Caps is a sequence of maths investigations designed to foster primary school students’ abilities to think about mathematics. Each investigation includes projectable questions to get students solving problems, communicating, reasoning, and understanding the mathematics they are learning and applying it to the financial world beyond the classroom.