The evolution of human knowledge has come leaps and bounds. It’s like each successive generation is inherently smarter than the last.

Certainly, the fast pace of technology has plenty to do with it, but as I’ve watched my own kids go through their schooling, it’s struck me how much better they seem at tackling increasingly challenging subjects. Thinking back to my own school years, I’m certain we didn’t attempt what is now classed as Year Four algebra until well into seventh grade, and some of my associates tell tales of their 11-year-olds speaking fluent Japanese!

But, for all this increased intelligence among our youth, there is one great failing letting down the next generation of Aussies. We continue to ignore the importance of financial literacy.

What is financial literacy

Some of you may be thinking, “What are you talking about Steve? My youngsters are learning about money. They know how to add up a series of coins, and realise they need cash to acquire treats and go to movies.”

Well, of course, they do. Access to money and the process of economic trade is an evolutionary skill learned through the mere fact of being in a family and doing stuff.

What I’m talking about is financial literacy beyond the mere recognition of currency. I want to see youngsters who understand the value of the dollar and how by properly tracking and planning the use of money, they can assure themselves of a low-stress future and plenty of life options.

This is the problem we have at the moment. In this nation, there are few programs that have been created to help educate people about becoming financially savvy and there are few incentives for Aussies to actually take some risks, have a go at smart investing and take care of themselves both today and in retirement.

Where we are failing

I think the problem is that when it comes to financial literacy, we’re reactive, not proactive. What I mean is we put a lot of emphasis on planning for the post-work years when they’re within sight. Suddenly, retirement is a reality and we need to do something about it ASAP!

Obviously, this ‘end focus’ is important and should be part of an investment strategy, but the great failing is people aren’t taught how to deal with money throughout every
stage of their lives. Having this ongoing knowledge around money management and investing would embed smart decisions in our financial DNA.

And it must start early.

I think if we tackled the subject of financial literacy earlier, we’d arm the current generation and those that follow, with skills to manage their financial lives as they grow.

An awareness of this sort stays with them throughout the decades, and their knowledge will evolve as they strategise on investing for the future.

This smart set will get to enjoy an acceptable standard of living throughout their working years AND know exactly how to fund their existence once the paycheques stop.

What to teach

Let’s give them some basics. Learn what a balance sheet and budget are. It would be so easy to run the hypotheticals with kids about how money coming in is a limited resource, and how utilising that income wisely lets you both enjoy the now and plan for a rainy day.

Let’s expand beyond this too. For example, I think credit cards have become a modern evil. They create more financial woe than benefit. Let’s teach kids about how credit card misuse is a slippery slope for undisciplined spenders.

They should also learn how finance works. Talk about loan applications, the idea of good vs bad debt, and how you can leverage money safely to own a home or build an investment portfolio.

Discuss asset values and cash flow, and the way buffers create a safe environment for you and your money.

I also believe we should start fuelling their entrepreneurial fire. Even for kids who won’t end up owning and operating a business, an awareness of the mechanics around establishing a venture, appealing to customers and using resources would expand their horizons and teach valuable lessons they could apply across many facets of their lives.

Upsides for all

Financial literacy should be mandatory – not just as an advantage to individuals, but as a societal benefit more widely. Imagine what our nation would be like if the next few generations were smart enough to manage their spending and plan for a lifetime of consumption and enjoyment without the stress of draining all their resources.

Imagine an Australia where the entrepreneurial spirit is cheered on and innovative thinking became a mainstay of productivity.

Unfortunately, this is not being addressed at the school level, with hungry young minds more likely to use the university of Google to seek out knowledge of finance.

Until we see finance given a front and centre position in our education system – it should be replacing less practical subjects in the curriculum – we’re doomed to have a society full of citizens chasing their financial tails from cradle to grave.

Similar to this:

The state of your wallet dictates the state of your mind

Is new market optimism a ‘dead-cat bounce’?

How self-funded retirees have control