Financial education for the next generation

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While Australian financial literacy levels stand up reasonably well on a global scale, a new schools-based start-up is part of widespread efforts targeting the greenest of grass-roots.

Australia ranks ninth in terms of financial literacy among English-speaking nations, with around two-thirds of adults (64 per cent) understanding basic financial concepts, according to the latest Standard & Poor's Global Financial Literacy Survey.

The 2014 study was the biggest of its kind, spanning 150,000 randomly-selected individuals who were asked four multiple-choice questions regarding risk diversification, inflation, numeracy (interest), and compound interest.

Global financial literacy rate
At least 3 out of 4 answers correct (percentage of adults)

(click image to enlarge)

Note: The number in brackets in the chart indicates the country's world ranking.
Source: Standard & Poor's Ratings Services Global FinLit Survey, The Financial Literacy Around the World Report

While the survey indicated more than two-thirds of Australians hold this basic level of financial literacy, on a global scale, the same proportion of respondents are financially illiterate.

It's unlikely few, if any, Morningstar subscribers would be among the 36 per cent of Australians who, on average, fall into this category. However, it's never too early to start developing good money habits, with young children an obvious starting point.

A New Zealand-based start-up, Banqer, this week entered the Australian market with a school-based program aimed at teaching children about money and financial concepts. Targeting kids in school years one to seven, it gives them the chance to learn about money in a safe, engaging and fun way.

Having been launched in 2015 by accountant-turned-developer Kendall Flutey, Banqer enables children to influence their financial environment by doing classroom jobs, or offering services to classmates, to earn cash.

Teachers can use the program’s reward system to help motivate their students, encouraging development and confidence. As Flutey explains, children using the system can learn valuable life skills by managing the rental of their desks and paying for class privileges.

Teachers can also trigger virtual earthquakes or sudden interest rate rises to emphasise the benefits of insurance and to demonstrate the importance of savings relative to debt.

Banqer has a two-tier structure, with children in years one to five learning about money management and personal finance topics such as income, savings and interest. Those in years six and seven cover more advanced topics such as mortgages, rent, income tax, and key insurance concepts, such as excesses, premiums and claims.

Kendall also emphasises that the lessons also transfer back into the home environment.

"That's pivotal to the program. In terms of engaging families, we've got parents who use it at home with their kids, they can all log on remotely and can use it in exactly the same way as in the classroom.

"Some of our parents, and grandparents, can translate that into real life pocket money," she says.

However, it has been most successful inside schools, having already been rolled out to more than 30,000 students in 450 schools in New Zealand, along with a handful in South Africa, Canada and the UK.

In the pilot phase, 28 schools in Australia--spanning a mix of private and public institutions, mainly in Victoria so far--have begun participating in Banqer. Flutey is aiming to reach 15,000 Australian students in the next 12 months, which she estimates will mean getting Banqer into around 500 classrooms.

"We think it's a lofty goal, but also achievable," she says.

The program costs parents or carers $3.50 per student, per school term--or $8 per student annually. However, for at least the first 15,000 students signed up, Banqer's partnership with Australian financial services licensee Netwealth means these costs are covered.

Matt Heine, Netwealth's joint managing director, stresses its involvement is about giving back to the community rather than a slick business model targeting the next generation of potential clients.

"It really is around the community aspect, we've been fortunate to have some good success [as a business]. While we've been traditionally focused on investing back into our staff and clients, this was a chance to invest in the community.

"Yes, we get some branding benefit, but as far as the business model, there really isn't one," he says.

Kendall also emphasises a similar point: "By no means do we see ourselves as an onboarding channel, that's something else that distinguishes us from some of the others."

"The only aspect that we're interested in, in terms of building a database, is collecting data on financial literacy from the students that we can get back to the teachers, parents and kids themselves, or to aggregate and anonymise [for the purposes of industry research]."

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Glenn Freeman is Morningstar's senior editor.

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