Week 4
Design sketch poster information
What is it about? What are you doing? What have you found? And, How is this important?
Categories:
-what is my topic (explain financial literacy, audience etc)
- What else it out there
- why its not working
- Where you'll be heading next
What is financial literacy?
Financial literacy is defined as the combination of knowledge, skills, confidence, attitudes and behaviours a person needs to make responsible financial decisions that improve the financial well-being of individuals and society. These decisions range from daily spending and budgeting to choices of insurance, banking, investment products, and saving for retirement and home ownership.
Financial literacy is not just about knowledge and understanding. It is also about having the motivation to seek the information and advice needed to engage in financial activities, the confidence to do so, and the ability to manage factors (such as emotion) that influence financial decision-making.
In the current NZ Curriculum financial literacy is not a subject itself nor is it aligned to a specific subject area. Instead it is suggested as a topic for cross-curricular activities implying that it should be incorporated across learning areas, but it is only specifically referred to in relation to key subject areas.
Only eight percent of New Zealand students were in schools where financial education is compulsory.
There are many financial literacy programs, all with different motives and content, that at times both students and educators feel overwhelmed and confused. Most of the educational programs address numeracy, financial literacy and selected financial concepts but do not adequately address the personal side of personal finance (attitudes, values, beliefs, decision making and personality traits). In addition, most of the people delivering the courses in many of these settings do not have formal education in the subject matter or any instructor training to teach personal finance and/or conduct course evaluations
Barriers to teaching in school
Time issues related to covering required curriculum content was the most frequently noted barrier to the implementation of financial literacy teaching in subject areas.
Relevance to the subject area being taught was the second most frequently noted barrier. Some teachers see financial literacy as an area that is additional to their current teaching and not something that can be integrated easily.
Resourcing was the third most frequently noted barrier, and this included teaching materials and funding for staffing and professional development.
Why its not working:
Financial literacy is variably interpreted by teachers and students as wider economic concepts, personal financial concepts and numeracy. This variability is problematic because there may be an assumption that financial literacy is being covered by a school within a subject area, but may overlook important elements of personal financial management.
Challenges to learning
• Relevance. The mind is not like a computer that can store arbitrary amounts of information. Instead, we tend to retain only what is useful for navigating our current circumstances. Financial education tends not to stick if it is not useful right away. Many curricula are flawed in precisely this way, teaching high schoolers about mortgages or debt management.
• Financial concepts are complex. Many of the most important financial principles are highly counterintuitive. Financial decisions almost always involve numbers, and many people have great difficulty with mathematics and anxiety about their numeracy.
• Projecting into the future. How much money will I need in retirement? Can I afford this house given what my income and expenses are likely to be in 10 years?
• The mismatch between what people know and what they think they know. We tend to be poor at evaluating how well we understand things. Sometimes this leads to under confidence. More often, the opposite is true. We are overconfident, thinking we understand things better than we do.
• A person’s self-confidence, group identity, and ability to process information, among others, have a direct impact on decision-making.
• Behavioural factors, such as impulsiveness and procrastination, affect our ability to persevere to meet goals.
• Cultural norms learned from parents and peers. There is a need to design capability interventions that address the knowing-doing gap and take psychological and cultural factors into account to reinforce healthy behaviors for the long term.
Due to a lack of resources and proven effectiveness of financial education, many are questioning whether education is the best use of scarce resources at this time. Instead, some people believe policy changes and governmental protections must be undertaken. The fundamental question, however, is whether we want people to be knowledgeable and capable of making independent and informed decisions that ensure their long-term financial well being, or whether we want the employer or government to make decisions for them and ask them to accept that these decisions are good for them.
Why is it important?
In a culture that demands individual responsibility and self sufficiency, financial literacy is an essential component of a successful adult life. Young adults are in an important transition period from financially depending on their parents to becoming financially independent. Young adults consider financial independence to be one of the top criteria for entering adulthood. University students know little more about finances than high school students do, but have much more freedom to make their own choices about money. It is therefore crucial that young adults begin to learn about finance during adolescence in order to have the best possible chance for a successful transition to adulthood.
Recently the process of transition to adulthood has become lengthened and more complicated for young adults. Key milestones such as residential independence, completion of education, entering the workforce, marriage and having children have become more protracted and diverse. With a longer period of transition to adulthood, many young adults rely on their parents and immediate families for financial assistance over an extended period of time. Researchers estimate that parents provide, on average, $38,000 in material assistance such as housing, food, educational, or direct cash assistance during the transition period.
In a 2009 survey on credit card usage among undergraduate students, 84% of students said they needed more education on financial management topics, 64% would have liked to receive information about financial management topics in high school.
When to teach it?
Several research papers support the idea that financial education in high school would help students become financially literate, with 96 percent of teachers and 90 percent of school leaders either agreeing or strongly agreeing that this would be the case. Parents and students often comment that it should be compulsory for all students to do Financial Literacy. It is a life skill and it would be great to see schools recognise this and cater for it in the school curriculum especially at junior levels and again at Year 13. Many governments are integrating financial education into school curricula. Compared to financial education for adults, financial education for children may have greater long-term effects: it reaches people when habits are being created and learning is easier for younger people. it is likely beneficial to provide financial education before individuals engage in financial contracts and before they start making financial decisions.
Parents role
Parents and family can have an important influence on their children’s knowledge and skills in financial literacy. As individuals' habits are formed at a young age, parents influence the development of their children's habits. Parents and family are an important source of financial socialisation, both by acting as role models and through direct teaching, especially when financial education is not offered in schools. 94% of students surveyed said they use their parents as a source of personal finance knowledge. although, it is important to note that parents themselves are often in need of more information or education on personal finance topics. Students receive the greater part of their personal finance education, which may or may not be accurate and complete, through their parents.
Parents' financial experiences may help narrow the gap in financial knowledge caused by lack of formal financial education. However, parents socialize children differently, perhaps due to lack of financial resources themselves or due to differences in ideas about when and how children should be included. Financial literacy of youth can be hindered if the parents have limited financial resources, experience, or access to financial services.
Important to consider
Financial education that is focused exclusively on imparting financial knowledge does not consistently lead to sustained behavioural change. A holistic approach to financial education that addresses multiple factors is most effective. For instance, financial decisions are also influenced by financial confidence, money management skills, problem solving ability, cognitive biases and behavioural tendencies as well as contextual and environmental factors. Education programs should consider these factors and design, develop, and implement effective programs to help these young adults enhance skills in these areas besides teaching them the contents of personal finance.
The quantity and timing of financial education matter. One-time education programs produce some short-term, but few long-term, effects. To make financial education effective and realistic, we must connect the core financial concepts to challenges that consumers face in reality as closely timed to those decisions as possible. It is also important to recognize that the population of young adults displays very large differences in financial knowledge. Thus, young adults should not be considered one homogeneous group of consumers. Rather, the differences by race, sex, educational attainment and other observable characteristics should be considered.
Theories:
• Transformative learning theory focuses on how people change through the educational process. it reflects a view of learning where the learner is seen as an active participant, creating and interpreting knowledge in relationship to their life experience. Financial education programmes grounded in transformative learning theory would examine how to actively engages learners in relation to their own lives as individuals, rather than as passive recipients of knowledge.
• Just-in-time education builds on the idea that some form of financial education must be effective, and that a central failure of financial education stems from the fact that people engage in financial-education classes at a time when the lessons are not relevant for them. Consequently, the lessons seem unnecessarily abstract and are unlikely to be remembered when the time to use them comes along.
• nudges can be used to encourage consumers to make the right decisions without additional effort on their part.
• Entertainment media offers not only broad outreach since nearly every household nowadays has a television, but also a willing and engaged audience. Moreover, as emotional connections are established between a show and its viewers, the program becomes a potentially persuasive tool for communicating messages and influencing behavior.
• Social learning theory suggests that most human behaviour is learned observationally through modelling, and from observing others. This theory suggests that both teachers and parents are important role models. Children and students learn by observing the behaviours of these two important figures in their lives.
• Adult learning theory, explains that adults learn by making meaning of their experiences. This theory would remind us that by incorporating reflection, sharing of experiences and learning from one’s experiences, we could improve the effectiveness of financial education.
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