Aussie kids behind on financial education?

Aussie kids behind on financial education?

Australia is now out of step with global leaders when it comes to financial literacy at a school level, new research shows. 

Financial education has been announced as an official part of the curriculum in both the UK and USA, but a subject dedicated to personal financial studies it’s still a way off for Australian schools, according to RateCity.

Yet, the findings from a review of Australia’s National Financial Literacy Strategy are set to be announced early next year by ASIC’s Financial Literacy Board, and will outline the key priorities for all Australians – not just children – over the next three years.

Alex Parsons, CEO of RateCity.com.au, is calling on government to focus on greater financial education at a school level.

“Financial education that’s interesting and relevant goes a long way to help children make better choices about money as adults and it needs to be a more significant part of the school curriculum,” he said.

“This is an exciting opportunity for Australia to be a champion in educating kids about complex financial issues and even lead the way globally.

“At the moment financial institutions are leading the charge on this by catering to school banking. But what we really hope to see is more practical finance education for kids.”

RateCity shows that a number of institutions cater to money education of young children under 12 years, as well as older teens, through school banking initiatives. Some of the institutions involved include – Commonwealth Bank (Dollarmites Club), and Hume Building Society (Junior Saver Club), among others.

He added that the world of personal finances is becoming more complicated and Australian children can no longer afford to be ignorant to complex financial products.

“It’s not just about learning how to deposit money into a savings account, or planning a budget; children would also benefit from learning that failing to pay a phone bill on time or skipping a credit card repayment could mean struggling to get a home loan one day,” he said.

“The ways we use money has changed a huge amount over the last decade and it is much easier to spend beyond your capabilities now. You can spend money you don’t have (credit cards), withdraw cash from almost anywhere (ATMs) and pay friends via a text message. Children need to be taught the fundamentals to ensure this increased accessibility doesn’t come with negative future consequences.”

Parsons added that while there are some great resources available to children, parents and teachers to improve financial literacy, including ASIC’s MoneySmart Teaching Program, an opportunity to really support greater financial literacy in schools is still a way off.

As a result, Australia is now behind the UK and USA, said Parsons.

“Financial education has just been confirmed as an official part of the English national curriculum, and personal finance is already being taught in schools in Wales, Scotland and Northern Ireland.

“A number of states in the US have adopted personal finance standards as part of overall curriculum requirements, including covering topics such as saving and investing, fraud and identify theft, and weighing careers against earnings.

“A good way to start teaching kids the value of money is to give them regular pocket money and help them open a junior bank account and show them how to build up savings to buy something special.”

RateCity shows that interest rates on children’s savings accounts are higher than typical savings accounts and range up to 5.75 percent, and many have no fees. Typically though, a number of conditions must be met to be eligible for the higher rate.

However, the responsibility of educating kids about money should not lie entirely with parents, particularly given that many may not have had any financial education themselves and technology has advanced at such a rapid rate, he said.

“At the moment most of the pressure to educate about personal finance is coming from industry, but it really should be a three-way conversation between schools, parents and institutions and it needs to happen now.”

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Learn more about savings accounts

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.