The Importance of Financial Education for Aotearoa’s Youth
During the lead-up to the 2023 General Election, both the Labour and National parties announced financial literacy policies that would equip high school students with basic financial concepts, such as managing, investing, and borrowing money by the time they finish high school. Such proposals received unanimous support from all government parties, highlighting the importance of financial education in Aotearoa, New Zealand. Financial education is important because it teaches students how money works and encourages healthy financial habits in students from a young age. Without financial literacy, youth in Aotearoa are left vulnerable to the ever-present pressures of saving and spending and increasing financial responsibilities as they grow up. As former Prime Minister Chris Hipkins said, “We want all young New Zealanders to leave school knowing how to manage their finances. It’s too important to be left to chance.”
First, it is necessary to understand what financial literacy is before discussing why everyone should learn it. Financial literacy involves understanding how money works and how it can affect our lives. On a personal level, financial literacy can teach how to utilise services such as savings accounts best, establish savings schemes for retirement (such as KiwiSaver), and manage debt responsibly. In addition, financial literacy can equip individuals with an understanding of how money shapes and affects society, such as interest rates and different tax structures. Financial literacy enables individuals to make appropriate and informed decisions about money. For this reason, educating youth about financial literacy is critical as it provides them with the best opportunity to take control of their finances, from a young age, and avoid making costly mistakes that can have detrimental financial consequences in the long term.
Financial literacy is also essential as we live in a society underpinned by monetary transactions. Although money cannot buy everything, much of our day-to-day lives depend on having money. Money allows us to obtain necessary goods and services such as food, fund our entertainment and experiences, and support us in times of crisis. Every day, we face expenses, and without the appropriate financial skills, we can quickly become vulnerable to debt and poor financial management. Therefore, being financially literate enables us to appreciate money and empowers youth to be financially independent.
The evidence is abundantly clear that not enough is being done in New Zealand schools to educate students. A survey by the Retirement Commission found that 80% of New Zealand youth wished they had learnt more about money in school. Additionally, a 2023 fact sheet released by the Labour Party pointed out that 10 years ago, the International Student Assessment reported that 15-year-olds in New Zealand were in the “lowest rung of financial literacy proficiency”. Furthermore, the New Zealand Council for Educational Research discovered that only 18% of teachers regularly taught financial literacy in classrooms.
The New Zealand education system has always required students to take subjects such as Mathematics and English, as they are deemed essential topics that provide vital life skills such as reading and writing. While all these skills are imperative, other important life skills, such as budgeting, investing, and saving, have been overlooked. All these financial skills are not only tied into our daily lives but have the potential to shape our future significantly. Yet, such skills are not always taught completely in schools, leaving many students uneducated on financial management and lack responsibility with money. For example, a student not taught basic financial ideas in school, such as opening a savings account, could miss out on large amounts of interest had they been educated and invested their money wisely from a younger age. Therefore, schools and teachers in Aotearoa should emphasise teaching financial literacy to students and prioritise strengthening their financial well-being skills as much as hauora is valued.
It is encouraging to see that more attention is being brought to highlight the importance of financial literacy in youth. Financial education is important for New Zealand youth as it empowers students to make informed decisions about spending their money. By providing practical financial skills from a young age, students can be financially independent and form healthy financial habits.
Opinion by Joseph Duong