Expert praises NZ for teaching finances in school

By NZPA

Friday 21st February 2003

Despite its poor savings record and high credit card debt, New Zealand has been praised for teaching its young people about being fiscally responsible.

Professor Lewis Mandell, of New York State University, says New Zealand's small size has enabled its Ministry of Education to build in "financial literacy" units into its curriculum, a move that would take decades in the States.

"New Zealand is leading the world right now ... it could very well end up as an export industry," Prof Mandell told NZPA today.

Surveys in both countries had found young people were much in need of such skills, he said.

A 2001 survey by the Enterprise New Zealand Trust had shown almost identical results to those from the United States -- that New Zealand teenagers could only get about half the questions right on an age-adjusted test of basic personal finance.

The US studies also showed that children from families where finances were readily discussed and pocket money was dished out were no better than their peers.

"..An awful lot of what we learn, a lot of the values we learn, whether we become terrible consumption oriented or whether we have a desire to save some money, is based to a large extent on what we learn from home.

"The difficulty is that asking parents to provide this knowledge assumes that parents themselves know what they're doing."

The widespread belief that starting children on a regular allowance so they don't spend all their money at once was also disproved.

Prof Mandell, who founded the Financial Services Review journal and helped start a coalition for financial literacy, said the movement came out of a realisation that US bankruptcies were reaching record levels despite unprecedented prosperity.

"We decided the answer probably lay in the complexity of the financial system. The proliferation of financial instruments, the ease with which everyone could obtain credit ...

"So we decided to focus for a while on young people, to see the extent to which those leaving school were capable of making decisions in their own self-interest."

Prof Mandell said such things did not fit easily into existing subjects like maths or economics and he advocated a separate course which taught finances from a wider social perspective.

Topics could include the advantage in saving while people were young and unencumbered, how to balance cheque books and use credit cards, use the tax system, borrowing and the concept of risk and return.

"In a society which lives for today, big problems coming down the road ... and there are really only two ways of dealing with some of these problems.

"One is to re-regulate and force people to save, but that tends to be bad for the economic development of a nation. It removes incentives.

"The other way is to allow free markets to reign but just make sure that everyone has sufficient ability to compete in this more of a jungle environment, so that even the weakest among us will not be taken advantage of," Prof Mandell said.

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