Half school leavers ‘financially illiterate’



Last updated 05:00 07/09/2009

Kiwi youngsters are leaving school “financially illiterate” and ill-prepared for the future, a new money knowledge survey shows.

The survey, released today by the Institute of Financial Advisers (IFA), shows that just over half of the 443 pupils surveyed could answer eight out of 40 questions correctly. The questions covered personal spending and saving, tax, KiwiSaver, earning power and education, credit-card interest, and rates of return on investments.

Institute president Lyn McMorran said the results underscored an “urgent need to increase focus on financial literacy in secondary schools”.

“We can conclude from the survey that most New Zealand senior secondary school students have a poor understanding of personal financial management and knowledge.”

She said the results were particularly disconcerting as more than 27 per cent of respondents reported they had had over 40 hours of financial literacy instruction.

The results were gathered from a cross-section of pupils from 54 schools around New Zealand.

Pupils did best on questions where they most likely had experience, such as ATMs and third-party car insurance.

Researcher Alex Neill, of the New Zealand Council for Educational Research, said it was well known that many pupils struggled with basic numeric skills, let alone their application to more complex financial situations.

However, he questioned whether the survey properly judged their financial intelligence.

“A test which has that few items, that fewer than 50 per cent of students can get correct, has the mark of a test which is too difficult.”

First-year Canterbury University commerce student Saboor Masud could be an exception to the rule.

At 17 while at Shirley Boys’ High School in Christchurch Masud earned his realtor’s licence, selling his first home.

The proceeds from three home sales had paid for his university tuition so far, and he planned to graduate debt-free and with no parental assistance.

Masud said he did not want to be disadvantaged when starting his career.

He was not surprised school pupils fared so poorly on the tests, as “most don’t even bother to show up for school”.

Retirement Commissioner Diana Crossan said the new school curriculum would incorporate a stronger financial literacy component.

In the survey, pupils had struggled most with questions on risk, compound interest and investment.

Only 10 per cent could correctly calculate monthly interest rate charges on a purchase and how long it would take to pay off.

When asked whether a savings account, government bonds, shares or a cheque account delivered the highest long-term interest rate, only 13 per cent answered shares.

Institute members would be talking to secondary school pupils this week to help raise awareness about the value of professional advice and financial education.