We need to start teaching basic financial literacy in secondary school. It’s so important that people have a basic understanding of what their finances mean so they can plan for the future and understand the impact of the decisions they’re making.
This is particularly important today. In this digital age, everything is accessible. Applications for personal lending, home loans and a range of financial services are available to almost everybody via a smartphone. Students are coming out of school and taking on a personal loan to go on a holiday or to buy a car, and getting a nasty shock when they realise how high interest rates can be.
Some may then be tempted to take out another loan to help offset the first. It isn’t long before they find themselves in financial difficulty. I think if these life skills were taught at school, we could point young people in the right direction and help them plan their finances a lot better over the long run.
At a basic level, budgeting and cash flow should be taught in school so that people understand ‘money in money out’ and how that impacts them over the longer term. There should also be a topic on lending, so people understand how a loan works and how interest can impact on their financial situation in the long run.
We also need to start the conversation about retirement planning – people should know about compounding interest and have an understanding of the power of putting a bit of money away today to benefit them tomorrow.
Another thing that people need to learn early on is how to be financially discerning. They need to be able to compare different products and services and to understand which one may make more sense to their personal situation.
Financial literacy plays a key role in everyone’s day-to-day life, no matter how much personal wealth we have. Whether you’re thinking about saving for a new home loan, buying a new car, investing or at the supermarket trying to understand which product offers the best value.
Kieran Hall is an Executive Advisor at Viridian Advisory
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