Why school alone can’t fix our financial literacy problem

“This needs to be taught in schools!”

If financial literacy had a catchcry, this would be it. Whenever the topic comes up, someone will exasperatedly question why their school didn’t teach them more about taxes.

It’s an understandable frustration. Met with an endless barrage of financial products and paperwork, it is natural to wonder why your education didn’t prepare you better for the real world.

Sandy Gokal wants to pass on her financial knowledge to her child from as early an age as possible.Credit:Louise Kennerley

However, while teaching financial literacy in schools is a good start, it will never be a complete solution. There’s a crucial stakeholder missing in this conversation: parents.

Research has found that parents have a key role in transmitting financial attitudes, behaviours and knowledge to their children, both by example and through direct teaching.

It was found that 94 per cent of students obtain information about money matters from their parents and children who did so outperformed those who did not in their financial literacy.

Financial education starts long before children enrol in school, from the informal ‘money lessons’ they witness at home regularly.

Yet, one in five parents say they don’t know how to better educate their children about finances, and three in five say they wouldn’t be confident teaching topics like investing in shares.

This points to a critical gap in the parenting toolkit, and it has consequences. The recent HILDA survey found that financial literacy has gone backwards, especially among under-35s.

So, we can’t rely on schools alone. Parents must be a part of the solution. Theory taught in school can quickly be undermined if those lessons are not reinforced or role-modelled at home.

Having helped hundreds of adults take control of their finances, including countless parents, I’ve seen first-hand that financially upskilling parents benefits the whole family.

Becoming financially confident empowers parents to have healthier money conversations at home and help their children practise skills like budgeting and investing from a young age. Once they know how, parents are often keen to pass this life skill on to their children.

This is certainly true for 32-year-old Sandy Gokal, who recently welcomed her first child. A few years ago, Sandy had just bought her first home with her husband and felt overwhelmed by her finances.

“Growing up, money was not something my parents talked about openly. They talked about saving, but that was about it. After getting married we bought a property, and suddenly I had this huge mortgage but still had no idea what I was doing with my finances. I didn’t know the first thing about things like investing, taxes, or superannuation. It was nerve-wracking,” she says.

Sandy decided to enrol in a financial education program, and less than five years later, she and her husband paid off over half their mortgage, tripled the balance of Sandy’s super fund, and saved more than $100,000.

Having experienced the benefits of financial education, Sandy says she now wants to pass this on to her child from as early an age as possible.

“I’m excited I have the skills to give my child a level of financial education I didn’t get growing up. I plan to have open conversations about topics like saving and spending. I also hope to start an investment fund for our child and use it as a tool to help them learn about investing,” she says.

Asked whether she wants to see financial education in schools, Sandy said she’d rather take a more active role in teaching her child about money.

“If it’s taught in schools, that’s great, but I’m not going to wait for school to teach my child something so important. In my opinion, parents play a bigger role on a day-to-day basis. My child is going to observe what I’m doing, and hear the conversations I’m having every day. ”

Sandy is not wrong. Financial education starts long before children enrol in school, from the informal ‘money lessons’ they witness at home regularly.

So, while school can be a useful complement, if we want to fix financial literacy rates for young people, we can’t afford to forget about the first ‘teachers’ children have: parents.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. Investors should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

Paridhi Jain is the founder of SkilledSmart, which helps adults learn to manage, save and invest their money through financial education courses and classes.

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