Smart borrowing to be taught in schools

Smart borrowing to be taught in schools

24 January 2013

Classroom changes aimed at improving financial literacy in Australia have been welcomed by a consumer advocate for accurate credit reporting, who says teaching kids about money, and especially credit is long overdue. He says a new generation needs to be clever with credit to survive.

Financial literacy lessons are to be rolled out nationally as term one of the school year begins, with the inclusion of Australian secondary schools to the ‘Money Smart Teaching Program’, developed by the Australian Security and Investment Commission (ASIC), adding to a primary school program that began last year.[i]

About 120,000 children and 6000 teachers will take part in the trials, with the secondary schools topics set to include compound interest, supermarket unit pricing, finding the most cost-effective mobile phone plan and borrowing money.

ASIC senior executive for financial literacy Robert Drake says it is hard to succeed in modern life without mastering money skills.

"Knowing how to handle your money and the choices you have got to make as a consumer is a challenging thing in modern life, and really is a core skill”, Mr Drake told the Daily Telegraph on Monday."[ii]

CEO of MyCRA Credit Rating Repair, Graham Doessel says credit is an integral part of today’s culture, but many young Australians do not know how to make it work for them.

“Many young people amble through their early years with credit, making mistake after mistake that can cost them dearly down the track. I have often said it should be taught in schools,” he says.

He says he has seen many young people caught in the credit trap - robbing Peter to pay Paul – and in the end their good name suffers for five to seven years due to credit infringements.

“I have seen young people get in deep with credit - putting cars and electrical goods on hire purchase and getting behind in repayments which sees them taking out new credit just to pay off the old credit. Before they know it, they’re 20 years old and facing Bankruptcy or Court Action and years of being locked out of the finance market coming into the crucial years when they need it most,” he says.

Mr Doessel says teaching kids the importance of responsible borrowing and encouraging the exploration of philosophies of consumerism would be invaluable to reshape a whole new generation’s attitude to credit.

“If we can arm our young people with more money knowledge, then collectively they may have a better break when it comes to home ownership and investments, things that seem to have eluded the current generation of twenty-something’s,” he says.

“To go further, even basic legal responsibilities and requirements around credit would be an invaluable addition to the Australian secondary curriculum which could see rates of default decline as those kids enter the credit market.”

ASIC's trial program will take feedback from schools, with an aim to make it available more broadly from 2014.

ENDS.

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