Tag Archives | financial literacy

Money and Power

CrownMoney and Power

At a political and economic level, we all know that those who control the money have the power. In personal relationships, it is no different. Control over money can be used in either a beneficial or detrimental way by one person to control another. The way in which money is managed in a relationship very often signals the underlying nature of the relationship.

In some instances, one partner may refuse to participate in managing money within the relationship. This can be for a variety of reasons. Sometimes it is because the person wishes to retain complete financial independence and do what they like with their own money whether the other person likes it or not. At the other end of the spectrum, it can be that one person is afraid of managing money and is happy to leave it all to the other person. There are many variations in between.

An unhealthy relationship with regard to money is one where a partner is kept in the dark on money matters despite being keen to know, where one person refuses to talk to the other about money or to reveal key information such as their income, or where one person is forced to sign financial documents without understanding the meaning of the documents or the consequences of signing. Sometimes, where there is significant wealth involved, it may be held in companies or trusts involving third parties without full information being disclosed to the shareholders or beneficiaries.

In a healthy relationship there is full disclosure between partners of financial information, there is a willingness of both partners to participate in managing financial affairs and there are agreed financial goals which are achieved through co-operative behaviour and sharing of financial resources. Ideally, partners should aspire to having similar levels of financial literacy.

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First Train the Teachers

First Train the Teachers

Financial management skills are best taught at a young age, however despite the development of a curriculum for financial education, few schools have taken up the opportunity to teach kids about money, claiming lack of resources and a crowded curriculum. There is another very significant barrier to financial education and that is the lack of financial skills in teachers themselves. Teachers at all levels of our education system have an important role to play in improving financial literacy and they need to be properly trained and resourced to carry out this role.

An exciting new pilot programme is about to get underway which will train tutors from Whitireia Polytechnic so they can acquire the skills and resources needed to deliver financial education. This initiative arose from a joint research project between the Commission for Financial Literacy and Retirement Income and Visa to explore ways of increasing the quality of formal financial education. The research was based on a survey of a number of institutions involved in trade training and the provision of community services. It showed that tutors in the surveyed institutions tended not to have specific expertise in the content or processes of financial literacy. Often, they relied on their own personal experience of financial matters. Less than half had received training or professional development and what they had received was not exclusively linked to financial literacy. When providers were asked why their teaching staff had not been trained or offered professional development, the common response was that it was due to professional development opportunities not being available. The conclusion of the research is that there is a pressing need for professional learning and development for teachers in formal financial education. If we want to see good quality financial education in this country, we must first train the teachers.

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Is Your Boss Short Changing You?

Is Your Boss Short Changing You?

Financial literacy is still a major issue in this country, particularly with regard to retirement savings. A recent online survey by ASB showed a huge gap for most people between the retirement income they want and what they will actually achieve at their current rate of saving. It seems most people have little understanding of how much money they need to save for retirement. Employers are in a good position to help educate their employees about retirement saving and ensure they are receiving the best possible advice on KiwiSaver contributions. Under current legislation, personalised advice on retirement savings should be given by an authorised financial adviser, however employers can provide employees with generic information on retirement savings and make arrangements for employees to receive personalised advice from an adviser at either the employer’s or employee’s cost. The financial literacy problem is not just about saving for retirement, however, it is also about how to save for more immediate goals such as buying a house, paying off a mortgage or taking an overseas trip. Most employees would benefit from education in simple budgeting techniques.

There are good reasons why employers should have a role in improving the financial literacy of their employees. It could be argued that employers have a moral obligation to ensure their employees are able to make informed decisions about whether they join KiwiSaver, the level of their contributions and their choice of fund. Otherwise, employees may be short-changed by missing out on employer contributions and Government tax credits. An equally compelling argument is that people who feel they are in control of their money are happier than those who feel as though they are living from payday to payday and not achieving their goals. Happy, contented people are easier to manage and more productive in the workplace.

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Good Habits for Kids

Good Habits for Kids

Financial literacy for kids is something that Lucas Remmerswaal is very passionate about. A New Zealander, Lucas has written a series of books for children, based on the financial principles used by one of America’s most successful investors, Warren Buffett.

In 2011, Buffett was ranked the third wealthiest person in the world with assets of around $47 billion and this year, Time magazine named him as one of the most influential people in the world. Buffett is a self-made man, having started accruing his fortune early in life through selling chewing gum, Coca Cola and magazines door to door. He bought his first shares at the age of eleven and went on to invest in numerous businesses throughout his life. He is now the primary shareholder, Chairman and CEO of Berkshire Hathaway, a multinational conglomerate holding company based in Omaha, Nebraska.

After seeing a large proportion of New Zealanders lose their retirement savings during the Global Financial Crisis, Lucas Remmerswaal decided to become a crusader for financial literacy in schools and to teach children the importance of being financially smart. Over the last two years, he has developed three children’s books that set out, with beautiful illustrations, the principles that made Warren Buffett successful. These books are The Tale of Tortoise Buffett, 13 Habits – Standing on the Shoulders of Giants and The A-Z of 13 Habits. A fourth book, 13 Habits That Made Me Billions is due out soon. Early in 2012, Lucas embarked on a bicycle trip covering the length of New Zealand, visiting schools along the way to spread his message. Integrity, Intelligence, Frugality and Gratitude are some of the 13 Habits that Lucas believes anyone can use to create extraordinary results in their lives. Click here for more information on Lucas and free downloads of his books.

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Strategies for Financial Literacy

Financial Literacy

International experts on financial literacy were beamed in from across the globe for the Retirement Commission’s recent summit on Financial Literacy. We know that financial illiteracy is a big problem in New Zealand, but we are by no means the only country in the world struggling to educate people on how to use their money more effectively. The major difference, however, between New Zealand and the rest of the world is that we lack the commitment and resources from our Government to tackle this problem in a way that will really make a difference. The Retirement Commission is internationally recognized for its efforts in financial literacy despite a limited budget. Diana Crossan, Retirement Commissioner, in her opening address reminded the Government that more money is required to support financial literacy in schools if we really want to see an improvement in the personal financial well-being of Kiwis. While financial education is now part of the school curriculum, budget cuts in the education sector have meant a drastic reduction in the funding available to support it. Money habits are formed early in life and changing the attitudes and behaviours of young people is an effective way to change the financial literacy of the population over time.

In the UK, a recent initiative is the Money Advice Service, which brings free, unbiased financial advice to people online, over the phone and face to face across the country. Our Retirement Commission is able to provide people with information and resources, but is not able to give advice. Free advice is available from the Federation of Family Budgeting Services, however the public perception of this service is that it is somewhere you go when you are on the verge of financial ruin. What New Zealand needs is low cost, highly accessible advice for all.

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Save the Nation

Save the Nation

New Zealand is on the brink of a financial crisis unless national savings increases, according to the final report of the Savings Working Group (SWG). Government, households and businesses are all guilty of overspending and borrowing too much money, leaving our economy in a vulnerable state. The SWG has recommended policies to increase the quality, quantity and rewards of saving. These include reducing serious tax distortions, and improving the disclosure for financial products, especially for fees and performance as well as improving their efficiency and returns.

In the area of retirement saving, the SWG has recommended that all employees over the age of 18 be automatically enrolled in KiwiSaver with the ability to opt out. At present, automatic enrolment applies only for new employees. Also recommended is that the enrolment age be lowered to 16 and that the default employee contribution be set at 4% with the option to drop it to 2%. Of course, one of the most obvious solutions to our savings problem is to increase the retirement age. Despite this being a good economic solution it is still politically unacceptable, at least until after the next election.

The proposal for the Government to help make annuities available to retirees is an excellent one. Many retirees prefer to have a regular monthly payment to supplement income rather than a lump sum to invest. It has been suggested that payouts from KiwiSaver could be part lump sum and part annuity.

While much progress has been made to introduce financial literacy into the school curriculum, the SWG has gone one step further and suggested that financial education be compulsory in schools. This is to be applauded. Increasing the level of knowledge of financial matters is critical for changing attitudes towards saving and thereby securing the financial future of our nation.

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