- 07 November, 2016
Are you 'financially literate'?
One of the catch-cries of the past couple of years has been the need for Australians to become more ‘financially literate’.
But what does it mean, and who does it apply to?
I guess that when we hear the term ‘financial literacy’ being thrown around our minds often turn to the younger generations.
It covers all of the things that they need to be doing to ensure they don’t make the same financial mistakes their parents and older siblings might have made when it comes to managing their personal finances. It’s all about someone else – and never about us!
However; by mixing in financial circles and spending a lot of time talking with financial advisers about their clients has caused me to refine my thinking regarding financial literacy.
I am totally committed to the idea of teaching young people about money. Most importantly – they need to understand the importance of having a realistic budget, living within their means, managing credit really carefully, and having a good working knowledge of investment principals like ‘dollar-cost-averaging’, compound interest, the rule of 72, and the different types of investments that are available.
Equally important is the need to be discerning. Having the ability to recognise a scam or some deal that is generally more about the promoter of the scheme making their own fortune rather than the person investing in the scheme.
And trust me; there are many people out there who are looking to separate you from your hard-earned money.
How many times have you walked through a shopping mall and had someone literally leap out from their pop-up stall to try and sell you something you don’t want or need? “Look at your skin – you absolutely must use our sea salt-infused, collagen-based, firming cream – here, come and try it!”
And while on the topic – we can’t finish this conversation without making mention of the bane of almost everyone’s life – the dinner-time telemarketer!
I know that the purpose of their call – as they always tell me – is not to sell me anything but simply to let me know that the government has a rebate scheme for solar panels. But when I suggest I know all about it, they still want to make a time for their ‘associate’ to call and present me with some information.
If they are not really wanting to sell me anything – then just stick the information in the mail! The postman still drops by our letter box (most days).
Somehow I think I’ve just gone off on a tangent – nothing new about that…
An important part of becoming financially literate is about becoming street-smart and not simply falling for every conman, trickster and chugger who wants to separate us from our money – and particularly those looking to sell us something we don’t really want or need.
Financial literacy is a topic often directed to teenagers and those in their early 20’s. However, I have come to the conclusion that a healthy grasp of financial literacy is relevant for all generations, including those of us who ‘should know a lot better’.
Imagine a couple about to retire. They have been working hard all their lives and now they are approaching that time in their life when they can take things a bit easier, smell the roses, and do things they want to do (rather than what they have to do).
This couple may have enjoyed a good income during their working lives, however, retirement may mean they will need to live on less income. They will need to adjust their spending to ensure they live within the means. Retirement will mean a new budget, discipline, and the need to become ‘financially literate’ all over again.
Financial literacy plays an important part in all stages of life. Some of the lessons learnt in the early years will last a lifetime, however, others will change depending on our age and circumstances. A 30-year-old will probably not have any interest in applying for the age pension – but for a 65-year-old – it may be vitally important.
The Realise Your Dream blogs are written by Peter Kelly and Mark Teale. More information about the authors can be found here