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‘Swim between the flags’ : The simple formula for managing money · The Money Puzzle

0:09
Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm
0:12
Speaker 1: James Kirkby. Welcome forward, everybody. One of the subjects really
0:16
Speaker 1: close to my heart is financial literacy and it's something
0:20
Speaker 1: I think that perme. It's basically right across media and
0:23
Speaker 1: across this show, and I'm sure all listeners are familiar
0:27
Speaker 1: with the concept at least, but what does it really
0:29
Speaker 1: mean in practice and what's going on. It's something I
0:32
Speaker 1: think that every listener should tune into because there's major
0:37
Speaker 1: issues ahead of you and people around you in relation
0:42
Speaker 1: to this financial literacy. We are not exactly leading the
0:47
Speaker 1: world we used to on this and there's a lot
0:49
Speaker 1: of subjects and a lot of issues that need to
0:51
Speaker 1: be improved. My guest today, Paul Clitheroe, chair of the
0:56
Speaker 1: Investment Group, is probably the person in Australia best known
1:00
Speaker 1: in relation to financial literacy, and he's also the chair
1:03
Speaker 1: of Extra, the Financial Literacy Foundation, of which I am,
1:07
Speaker 1: by the way, in the interest of bundes Culture, i
1:09
Speaker 1: am a director of the same organization.
1:13
Speaker 2: How are you, Paul, No, I'm really good. Thanks James.
1:16
Speaker 1: Great to have you on board. I mean, as I say,
1:19
Speaker 1: you are the person most associated with financial literacy because
1:24
Speaker 1: you were the founder really of this whole group. But
1:28
Speaker 1: most people are still probably a little bit unsure exactly
1:31
Speaker 1: what it is and why it matters. Tell us what
1:35
Speaker 1: is financial literacy for us to board and why it
1:38
Speaker 1: matters to our listeners who are mostly active investors.
1:41
Speaker 2: Ah see here we're probably speaking to the converted, I think, James,
1:45
Speaker 2: But look back, and I think we'd all agree that
1:47
Speaker 2: the reason it matters critically, and it matters across twenty
1:50
Speaker 2: six million Australians putting aside really rap young little bubbers,
1:54
Speaker 2: but it's fair even for financially literate listeners like yours, James.
1:57
Speaker 2: That look, I think the big deal for me is
2:00
Speaker 2: that a modern economy it allows you to do something
2:03
Speaker 2: humans haven't been able to do for some seven thousand
2:05
Speaker 2: years the documented history since bank card popped along in
2:09
Speaker 2: about nineteen eighty. For the first time in history, the
2:12
Speaker 2: everyday consumers, all of us, can spend money that we
2:15
Speaker 2: simply don't have. We can spend money that we've yet
2:18
Speaker 2: to earn, and we're spending money that we hope to
2:20
Speaker 2: earn in the future. Now this really is new for humans.
2:23
Speaker 2: In my uni days was probaty, same for you, James,
2:25
Speaker 2: pretty straightforward. Different to you, James, I was in Union
2:28
Speaker 2: of the mid nineteen seventies. If I didn't get to
2:30
Speaker 2: the bank by three o'clock on Friday, they shut at
2:32
Speaker 2: three o'clock. But didn't get to the bank by three o'clock
2:34
Speaker 2: on Friday, and I didn't get out my twenty dollars
2:36
Speaker 2: spending money. I didn't go out on the weekend, and
2:39
Speaker 2: I've worent at the pub on Saturday night, which is
2:41
Speaker 2: pretty common, and I ran out of money. I'm at home.
2:45
Speaker 2: And so the system actually taught me financial literacy. There
2:49
Speaker 2: was literally if I didn't work in my bar job
2:52
Speaker 2: or come and Dad us to help out with my
2:53
Speaker 2: UNI college fees twenty four dollars a week. But basically,
2:57
Speaker 2: if I didn't have that money, well, find got to
3:00
Speaker 2: get thrown out of college. I wasn't going to eat
3:02
Speaker 2: and I wasn't out of a b So it's complicated, James,
3:05
Speaker 2: And so it does matter now more than ever because
3:08
Speaker 2: in the past the system did not allow you to
3:11
Speaker 2: get into dreadful trouble with money. The truth is, James,
3:14
Speaker 2: the system now allows you to get in as much
3:16
Speaker 2: trouble as you like, so you need to know the rules.
3:20
Speaker 1: And very quickly if you wish at a very young age. Also,
3:24
Speaker 1: as you say, I mean, that's a really good example.
3:26
Speaker 1: My old kids tell me. I mean, I couldn't believe it.
3:29
Speaker 1: My son was telling me in bars a minimanic bars
3:32
Speaker 1: later that of late of recent decades, but he says
3:36
Speaker 1: that his peers are his age group. They take out
3:38
Speaker 1: credit cards or money cards, not even looking at what
3:42
Speaker 1: they're spending. Obviously, you can just imagine the scene at
3:45
Speaker 1: one o'clock in the morning, and that's that's kind of
3:47
Speaker 1: good example of on the street. And then maybe more generally,
3:50
Speaker 1: it's so easy to be lured, if you like, or
3:53
Speaker 1: seduced into financial arrangements that could be considerably more complex
3:57
Speaker 1: than people realize. I think, as you say, many listeners
4:01
Speaker 1: on the show would like to think they are already
4:04
Speaker 1: financially literate. But's a much wider rasue, isn't it, in
4:07
Speaker 1: terms of financial capability. And everybody, I'm sure knows people
4:13
Speaker 1: in their social circle or maybe their kids or their kids' friends,
4:16
Speaker 1: and you can see it coming down the line. You know,
4:18
Speaker 1: these people have perhaps a disposition that is going to
4:22
Speaker 1: lend them is going to lead them into trouble unless
4:25
Speaker 1: they are clewed up basically on financial literacy. So with
4:30
Speaker 1: extra it's taught in the school system, could you explain
4:34
Speaker 1: to the listeners like who teaches it, how does it work,
4:38
Speaker 1: and who gets to get a class in it and
4:41
Speaker 1: who doesn't.
4:42
Speaker 2: Yeah, a really good question. Look, this all started with
4:45
Speaker 2: I Shair the Australian Federal Governments Financial Issue Board Young
4:48
Speaker 2: Beeck some twenty odd years, which is where the national
4:51
Speaker 2: Financial Literacy Strategy came from. And that does include the
4:56
Speaker 2: school curriculum. I don't think even probably some of your
4:59
Speaker 2: more skillful listeners that may be aware, but financial literacy,
5:03
Speaker 2: despite what you'll see in the media occasionally, it is
5:05
Speaker 2: embedded in the school curriculum. The current curriculums Curriculum nine
5:09
Speaker 2: and it's embedded, and it's embedded across maths. We've also
5:13
Speaker 2: got social sciences and humanities. What the listeners may not
5:17
Speaker 2: know though, is that it is not separate subject matter.
5:21
Speaker 2: Now I have sympathy for this, James Are. School curriculum
5:24
Speaker 2: is incredibly crowded and teachers often tell me they feel
5:27
Speaker 2: as though they're kind of expected to be parents these days.
5:30
Speaker 2: They're expected to do environmental stuff and money stuff. There's
5:34
Speaker 2: all sorts of issues going on with online internet bullying.
5:37
Speaker 2: There's a whole world out there. Teachers are rarely under pressure,
5:41
Speaker 2: and there's also about three hundred and twenty thousand primary
5:44
Speaker 2: and secondary school teachers. So what's happening at the moment
5:48
Speaker 2: is that sure, we've got wonderful programs like extras Talk Money,
5:51
Speaker 2: which some five hundred and forty thousand kids have been
5:54
Speaker 2: had a chance to be impacted by the sensible ideas
5:57
Speaker 2: in there. But in the classroom, we've really got some schools,
6:02
Speaker 2: some principles have really said this is we need to
6:05
Speaker 2: be doing this, and we see it's embedded in the curriculum,
6:08
Speaker 2: but they're actively saying to their teachers, look, it is
6:11
Speaker 2: we need to we need to be teaching this stuff
6:14
Speaker 2: in maths. And so they're going to Extra for resources,
6:17
Speaker 2: They're going to Assex Wonderful Money website for resources. So
6:21
Speaker 2: the stacks of resources out there for teachers. But the
6:24
Speaker 2: honest answer is it's patchy, James, and it's not as
6:29
Speaker 2: simple as we may think. Though three hundred and twenty
6:32
Speaker 2: thousand teachers. Some years ago, Julia Gillard gave a special
6:35
Speaker 2: grant of ten million dollars to train teachers. It costs
6:38
Speaker 2: round about one thousand dollars for a two day program.
6:40
Speaker 2: So with you're ten million dollars, you've actively trained one
6:44
Speaker 2: thousand teachers three hundred and nineteen thousand to go.
6:48
Speaker 1: Yeah, it's right. Okay, So this is the sort of
6:51
Speaker 1: scale of the challenge head in the schools.
6:55
Speaker 3: The thing I would be concerned about in schools is
7:00
Speaker 3: it seems to me and maybe this never will change,
7:02
Speaker 3: but we could work on changing it. Kids who are
7:06
Speaker 3: already good at math or accountancy or business or whatever.
7:12
Speaker 1: Or economics, obviously in a way, they will by osmosis
7:16
Speaker 1: nearly they will pick up facial literative. So is the
7:19
Speaker 1: concern really for the kids who aren't that way? It's
7:22
Speaker 1: the kids who is that who you're targeting.
7:26
Speaker 2: No, kids who want to have natural home and natural
7:30
Speaker 2: in some looks. Some kids love football, some kids like
7:32
Speaker 2: you know, money is clearly more interested in some kids
7:34
Speaker 2: to other. Research shows that very clearly. But the point
7:37
Speaker 2: here is it's one of the reasons why people say,
7:39
Speaker 2: but in a humanity subject like English, how is a
7:42
Speaker 2: teacher doing something about money in English? Well, a really
7:45
Speaker 2: interesting problem for a family who's not particularly financially literate,
7:49
Speaker 2: and there's there's plenty around. Okay. One of the reasons
7:52
Speaker 2: we're doing financial literacy in English, for example, is in
7:55
Speaker 2: English you can do spelling words like spell, compound, interest,
8:00
Speaker 2: you can put money into. So what we've got here
8:03
Speaker 2: is not just a numerousy skill, James. What we've got
8:06
Speaker 2: here for many Australians, and I think most of the
8:09
Speaker 2: listeners a day a going what's he banging on about?
8:12
Speaker 2: Let's call the language of money Mandarin. For a moment,
8:15
Speaker 2: you're like, we all speak this money language called Mandarin.
8:19
Speaker 2: It is as difficult as Mandarin. It's a very sophisticated language.
8:23
Speaker 2: It's not easy to learn. And the trouble is if
8:26
Speaker 2: you are fluent in my money Mandarin, when people are
8:29
Speaker 2: speaking to you in money Mandarin, you understand it. But
8:33
Speaker 2: for other people, Seriously, when you're at a barbecue and
8:36
Speaker 2: you say, what do you think about the government's change
8:38
Speaker 2: the negative gearing, it's embarrassing not to know, right.
8:41
Speaker 1: That's that's right. You forget that point. Also, you forget
8:45
Speaker 1: that the other people don't speak the language, don't speak
8:47
Speaker 1: money Mandarin. Good point.
8:49
Speaker 2: So we want to give the language skills of money. Like,
8:52
Speaker 2: it's all very good and well to say compound interest, Well,
8:55
Speaker 2: what's it mean? So we need to help We need
8:57
Speaker 2: to help teachers with how do we not only in maths.
9:01
Speaker 2: It's not just a numeracy skill. It is a life skill.
9:05
Speaker 2: And so that's why actually it is embedded across the
9:08
Speaker 2: curriculum in various subject areas because their educators aren't silly.
9:12
Speaker 2: They know this is the case that it is the
9:14
Speaker 2: whole of life skill. And if you don't get the
9:16
Speaker 2: if you don't get the language going in a sense,
9:19
Speaker 2: the math's not a lot of use to you.
9:20
Speaker 1: Yeah, yes, very good point. So it's wider, folks than
9:23
Speaker 1: I might even have outline at the start, this idea
9:26
Speaker 1: that financial literacy is all about finances, Paul saying it's
9:28
Speaker 1: actually broader and one of the things that is happening
9:31
Speaker 1: inside the area at the moment is the use of
9:34
Speaker 1: the word financial capability more often. It turns out just
9:37
Speaker 1: because you're a numerate doesn't mean you're smart money. Okay,
9:40
Speaker 1: we'll be back in the moment because I want to
9:42
Speaker 1: bring up with Paul what's going on in Australia or
9:45
Speaker 1: to be more precized what's not going on and it
9:47
Speaker 1: is emerging really as an issue for us. Hello, welcome
10:00
Speaker 1: back to The Australian's Money Puzzle podcast. I'm James Kirby
10:04
Speaker 1: and today I'm talking to Paul Clitherow, who I'm sure
10:07
Speaker 1: you know, of course from his years on Channel nine
10:09
Speaker 1: and many shows the Money Magazine in best Martin Barry's
10:13
Speaker 1: chair and financial literacy is a mutual literest of ours
10:16
Speaker 1: and Paul, you mentioned at started the show how you
10:20
Speaker 1: had been involved in Financial Literacy Foundation Extra from its
10:24
Speaker 1: early days and it got off to a flying start.
10:27
Speaker 1: But in recent surveys Australia all wec D Service Australia
10:32
Speaker 1: has kind of slid down the tables in terms of
10:35
Speaker 1: financial literacy and the performance of younger Australians in particular
10:40
Speaker 1: is the weakest part there. So how do we read
10:42
Speaker 1: that against the fact that the foundation is there with
10:45
Speaker 1: five hundred thousand kids have gone through the program.
10:49
Speaker 2: It's a really it's a really challenging issue. We actually
10:52
Speaker 2: something we believe in the school system. We spoke earlier
10:55
Speaker 2: about the fact that financial literacy is embedded in the curriculum,
10:59
Speaker 2: not as a separate subt matter, but it's embedded across
11:01
Speaker 2: various subjects, maths and social sciences, humanities and so on.
11:05
Speaker 2: We actually did participate, much to my great excitement, in
11:08
Speaker 2: the global please Are testing. We did that over three years.
11:11
Speaker 2: At the last one we did was twenty eighteen. We
11:14
Speaker 2: were fifth in fifteen participating countries. It is a voluntary thing,
11:18
Speaker 2: the financial literacy questions. Obviously, we're constantly testing fifteen year
11:21
Speaker 2: olds around English and maths, and so we should. Financial
11:24
Speaker 2: literacy is one of the things that a country can
11:26
Speaker 2: choose to participate in, so our last time to make
11:29
Speaker 2: that choice. There's all sorts of stuff you can choose.
11:32
Speaker 2: You can't have everything all the time. But basically I
11:34
Speaker 2: wouldn't say we've been dreadful, but we've sort of with
11:37
Speaker 2: a fairly significant issues going on at government levels. I
11:41
Speaker 2: think financial literacy, in amongst a whole bunch of other problems,
11:45
Speaker 2: has become a bit of a softer subject matter, so
11:48
Speaker 2: it's seen as well, Gee, maybe that's more the sort
11:51
Speaker 2: of thing that happens in the home with mum and
11:52
Speaker 2: dad and grandparents and so on, which is all very
11:56
Speaker 2: well for kids whose parents because many parents also have
11:58
Speaker 2: not been taught financial skills, so it is a bit
12:01
Speaker 2: of a vexed argument. I do fundamentally agree that where
12:04
Speaker 2: the kids will come to this a bit later, where
12:06
Speaker 2: kids will learn most is the home. But the schooling
12:09
Speaker 2: system can really reinforce that knowledge, and so I'm particularly
12:14
Speaker 2: keen for that to happen.
12:16
Speaker 1: In many instances, it's not going to happen in the home.
12:18
Speaker 1: So it's up to the person. And in money ways,
12:20
Speaker 1: investment is like that. I mean, it is very much
12:22
Speaker 1: up to you, the active investor, to sort of car
12:25
Speaker 1: burau and path through it. What could be done that
12:30
Speaker 1: would get the issue back on the front foot here
12:34
Speaker 1: and get the performance, the national performance in terms of
12:37
Speaker 1: scoring back off the opper ranks.
12:40
Speaker 2: Look, I think what we need is I mentioned earlier on.
12:43
Speaker 2: We've got some the system. With some three hundred and
12:45
Speaker 2: twenty thousand teachers across primary and secondary schools across the country,
12:50
Speaker 2: We've kind of got a lot of the key steps
12:52
Speaker 2: we need. We sort of had the big battle twenty
12:54
Speaker 2: five years ago and with strong agreement right across the
12:57
Speaker 2: community and the Department of Education and politician to get
13:00
Speaker 2: financial literacy in as an embedded matter in the curriculum,
13:05
Speaker 2: but not as a separate subject. Which we discussed previously.
13:09
Speaker 2: So basically what we're moment relying on really, James, we're
13:12
Speaker 2: really relying on the good will and enthusiasm of principles
13:16
Speaker 2: and teachers to take that and embed it in the
13:19
Speaker 2: teaching in the schools. So to be at a core level,
13:22
Speaker 2: we're getting mixed results, James, because we haven't been able
13:25
Speaker 2: to train the hundreds of thousands of teachers in this
13:28
Speaker 2: area who trained a bit over a thousand over time
13:30
Speaker 2: thanks to a ten million dollar grant from the Gillard
13:32
Speaker 2: government many years ago. So what you need is you
13:35
Speaker 2: need at leadership level. You need at a leadership level,
13:40
Speaker 2: which of course I think is at a federal and
13:41
Speaker 2: state level. At a leadership level, you need people to
13:44
Speaker 2: stop just saying look, we know it's important, but pragmatically,
13:48
Speaker 2: how do we actually get this happening in the classroom.
13:51
Speaker 2: And it's going to take time, commitment, and money. And
13:55
Speaker 2: that's why organizations like Extra, which I've shared for since
13:58
Speaker 2: its inception, And I'm very delight of James that you
14:01
Speaker 2: joined us as a director last year with all your
14:03
Speaker 2: skills in our pro bono roles there, which I think
14:06
Speaker 2: is also really helpful and important.
14:08
Speaker 1: I should have said that, yes, love and clear, everything
14:10
Speaker 1: is pro Bonner Bonner.
14:12
Speaker 2: Yeah, yeah though, and I think round financial literacy that
14:14
Speaker 2: that makes a fair of sense to me. So basically
14:18
Speaker 2: what we need is a bit like the Gillard government
14:20
Speaker 2: at least saying, look, we're going to make this commitment
14:22
Speaker 2: to training. So it's a many stage process. Now how
14:26
Speaker 2: do we bluntly people like you and I, we're just
14:29
Speaker 2: individuals in the community. I really feel it would really
14:32
Speaker 2: help no end because every this is not an arguing point.
14:36
Speaker 2: Everyone agrees kids should be given financials. This is not
14:39
Speaker 2: a debate about capital gains tax. We this is not
14:43
Speaker 2: it's not even a debate. This is this is every
14:45
Speaker 2: time I'm down in Parliament, House or whatever. This is
14:47
Speaker 2: a nodding heads thing. Everyone says, we want our kids
14:50
Speaker 2: and grandkids to learn financial literacy. It's a no brainer.
14:54
Speaker 2: So what we need to do though, we need to
14:57
Speaker 2: number one to understand that the school system is very
14:59
Speaker 2: streng and very stressed. And I get the role of
15:02
Speaker 2: a teacher. I look what my grandkids are learning in school.
15:05
Speaker 2: Ain't teachers do an extraordinary job. That's just unbelievable. And
15:08
Speaker 2: to say to them, now, by the way, you need
15:10
Speaker 2: to do forty minutes of financial literacy a day. We
15:13
Speaker 2: need a more sophisticated approach, and that, James, because teachers
15:17
Speaker 2: want to do it, schools want to do it, principles
15:19
Speaker 2: want to do it. So the thing is, as a nation,
15:22
Speaker 2: we need consistent momentum about this actually is important. We've
15:28
Speaker 2: got all the pieces we need, We've got tons of material,
15:31
Speaker 2: and we need as a nation to say we commit
15:35
Speaker 2: as we maybe doing with technology or startups or entrepreneur behavior.
15:39
Speaker 2: You actually need leadership that says we all agree, no
15:44
Speaker 2: one's arguing anyway. Let's sit down and work out inside
15:48
Speaker 2: a busy school program, how do we implement financial literacy
15:52
Speaker 2: in a way that doesn't stress teachers any further and
15:55
Speaker 2: hopefully you can make teaching more enjoyan. In maths, the
15:58
Speaker 2: financial literacy is a no brainer. The ability to say
16:01
Speaker 2: to kids, Mum and dad whack an extra ten dollars
16:03
Speaker 2: a week into their mortgage, How much better off l
16:05
Speaker 2: A over twenty years? Goodness, James, You've got a pure
16:08
Speaker 2: mathematical principle, you've got compound interest, and you've also got
16:12
Speaker 2: kids going home saying to mom and dad, Hey, mom
16:14
Speaker 2: and dad, you'd be twenty grand better off if you
16:17
Speaker 2: put twenty bucks a week in your mortgage. So there's
16:19
Speaker 2: some absolute no brainers here, James. We just need political
16:23
Speaker 2: and community will to make it happen without stressing school teachers.
16:27
Speaker 1: Further, and a clear national strategy for everyone knows where
16:31
Speaker 1: they're going, something like. I mean, if you think about
16:33
Speaker 1: the STEM and how the sciences have managed to refriend
16:38
Speaker 1: themselves inside education in a very positive life and that shift,
16:44
Speaker 1: I think that's that I can see. I think more
16:46
Speaker 1: listeners would pick up on what we're seeing here. Okay,
16:50
Speaker 1: now here's just one more question on this, and it's
16:53
Speaker 1: a it's what I'd like to call it a vexed question, Paul,
16:57
Speaker 1: what's the rule of big players? It's the incumbents, the banks,
17:01
Speaker 1: the big super funds. Do they have a rule? Because
17:04
Speaker 1: we know that often they pick up this issue with enthusiasts,
17:09
Speaker 1: but often also in the fullness of time that transpires
17:13
Speaker 1: that it's waxes and wanes. Sometimes it's abused for a
17:19
Speaker 1: commercial gain, Like do they have a rule? What is it?
17:23
Speaker 2: Look absolutely where we need to be careful and look
17:25
Speaker 2: to the Commonwealth Bank's credit for examples. And I'm not
17:27
Speaker 2: picking on the Comonwealth Bank. Here I'm giving the praise.
17:30
Speaker 2: They work very hard to put together through their foundation
17:33
Speaker 2: the schools program, but there's always going to be a
17:37
Speaker 2: bit of a branding problem. So the blunt answer is,
17:40
Speaker 2: and I think now they put so much work into
17:42
Speaker 2: that program and as they withdrew from the schools because
17:46
Speaker 2: of the whole issue around communities, and I get that
17:49
Speaker 2: should the kids be learning at school from the Comwealth
17:51
Speaker 2: Bank or an actual fact? Is it a branding and
17:54
Speaker 2: marketing exercise until its credit the Comwealth Bank, And they
17:57
Speaker 2: got a bit of flat too, by the way, and
17:59
Speaker 2: they did I think the right thing. They withdrew. But
18:01
Speaker 2: what they did do is they actually allowed us at
18:04
Speaker 2: EXTRA completely independent. As you know, James the director, the
18:07
Speaker 2: money we have comes from government, so we've got no conflict.
18:12
Speaker 2: But we were able to take over that program not
18:15
Speaker 2: having started afresh. And now obviously we're using our funds,
18:18
Speaker 2: which are government funds, we're using our moneies to basically
18:22
Speaker 2: fund that program going forward. But it sits there with
18:25
Speaker 2: no branding on it. EXTRA is simply a not for
18:28
Speaker 2: profit foundation that doesn't offer credit cards or bank accounts
18:32
Speaker 2: or anything else. So that in my view is obviously,
18:36
Speaker 2: so they're foundations funding existing programs incredibly valuable. And the
18:41
Speaker 2: other big thing where banks and financial institutions can be
18:43
Speaker 2: incredibly helpful is better communication to consumers about fraud. I mean,
18:49
Speaker 2: clearly financial literacy now needs to encompass getting ripped off.
18:53
Speaker 2: And here the banks, because here a person being ripped
18:56
Speaker 2: off is nearly always a bank customer, and the bank's
18:59
Speaker 2: ability to educate and help their consumers would be incredibly
19:03
Speaker 2: helpful to financial literacy because that is actually their business.
19:06
Speaker 2: I don't think their business is being in schools James.
19:09
Speaker 1: Right, okay, very clear, all right, Well, as you can
19:11
Speaker 1: see books that that is an issue, and it comes
19:14
Speaker 1: again and again, and I suppose the issue Paul, when
19:16
Speaker 1: you get an organization, it's hard to generalize. I mean,
19:20
Speaker 1: you can pick a bank and what will happen is
19:22
Speaker 1: the regime in the bank at that time may sincerely
19:25
Speaker 1: wish to do well in this area, to help in
19:27
Speaker 1: this area, but then you know management will change and
19:30
Speaker 1: their priorities will change, and there is always that issue
19:32
Speaker 1: as well as them. There. I think the most important
19:35
Speaker 1: thing in this area is who to target and what
19:40
Speaker 1: should they learn or what to take a look at
19:41
Speaker 1: that in a moment we take a short break. Hello,
19:53
Speaker 1: Welcome back to the Australian's Money Puzzle podcast. James Kirby
19:56
Speaker 1: here talking to Paul Clitherow. Delighted to have him on
19:59
Speaker 1: the show hall with his this is with his extra
20:02
Speaker 1: hat on that is e c str the Financial Literacy Foundation.
20:08
Speaker 1: We were talking in the first segment and we should
20:09
Speaker 1: have developed us to the flashpoints really are for financial
20:13
Speaker 1: literacy financial literacy area. Obviously there's the rolling issue of
20:19
Speaker 1: not being ripped off, the rolling issue of understanding the
20:22
Speaker 1: basics about how markets work, about how the world works financially.
20:27
Speaker 1: But then there are always specific issues that you were
20:30
Speaker 1: talking about when you were in the university and you
20:32
Speaker 1: couldn't be quite so easily fooled. And I'm sure that's
20:37
Speaker 1: the case, but there was always scams. There was always
20:39
Speaker 1: higher purchase for instance when it commit people car financing.
20:43
Speaker 1: Oh we can do financing for you, Oh, thank you
20:46
Speaker 1: very much. But there's always the sort of what are
20:48
Speaker 1: the big issues of today?
20:52
Speaker 2: This is the reason the sense why I'm saying you
20:55
Speaker 2: are we've seen longitudinal surveys indicating we're going backwards with
20:59
Speaker 2: financial literacy. We're not going backwards with financial history. Australians
21:02
Speaker 2: are getting better every year. But as we get better,
21:05
Speaker 2: the system becomes harder, It becomes more and more complex,
21:09
Speaker 2: the scams become more sophisticated. Superannuation is craaky, Charlie that
21:14
Speaker 2: I'm meant to be a sunny expert, believe you, me
21:16
Speaker 2: and James. I've got a superannuation advisor. It's become a
21:19
Speaker 2: specialist skill. You can't do super as a generalist anymore.
21:21
Speaker 2: And I'm a generalist. So really we've got all sorts
21:24
Speaker 2: of stuff going on. But I keep running back to
21:28
Speaker 2: the one thing that hasn't changed is what I like
21:30
Speaker 2: on my tombstone is I would really like it that
21:33
Speaker 2: rather than people saying to me, as I'm wandering around
21:36
Speaker 2: a train or a bus or whatever. People I used
21:39
Speaker 2: to watch that Money show, they read Money magazine and
21:41
Speaker 2: they say can I have a hot tip? And I
21:43
Speaker 2: generally tell them not to stand in a canoe? But
21:45
Speaker 2: there would be nice to your mother. But what I'd
21:48
Speaker 2: really love is, I really love it when people say,
21:51
Speaker 2: you know what, I saw that money shaw of yours
21:53
Speaker 2: thirty odd years ago and you said, put twenty bucks
21:55
Speaker 2: a week into your mortgage. I thought that was a
21:57
Speaker 2: stupid small amount of money. But I did and paid
21:59
Speaker 2: my more job seven years early. Now, that for me,
22:03
Speaker 2: is genuine financial literacy. It's just people saying to me,
22:08
Speaker 2: you know what, Look, I've done a bit of a
22:10
Speaker 2: rough budget. I've got a bit of an idea if
22:12
Speaker 2: I'm spending more than I earn. I love it when
22:15
Speaker 2: people say the fundamental of financial literacy, James, is to
22:19
Speaker 2: spend less than you earn. I've got people who talk
22:22
Speaker 2: to me with a lot of money and they're going
22:24
Speaker 2: out backwards. I've known many Australians who had very normal
22:28
Speaker 2: jobs and they have retired extremely comfortably. What's the difference.
22:33
Speaker 2: It's not what they've earned, it's they've spent less than
22:37
Speaker 2: they've earned. And that to me, Gee, James, if all
22:40
Speaker 2: we got out of financial literacy was people saying, I
22:43
Speaker 2: don't really need a hot tip because that's sure to
22:45
Speaker 2: be a crook or a scam. Or if someone's telling
22:47
Speaker 2: you it's really easy, it's got to be too good
22:50
Speaker 2: to be true, right, I Mean, that's just not the
22:52
Speaker 2: truth about money. The problem is that none of this
22:55
Speaker 2: stuff is easy. It's difficult. The system's difficulty to understand
23:00
Speaker 2: all of it, James, like you try or I try
23:02
Speaker 2: to understand what I lift the bonnet of my car.
23:05
Speaker 2: These days, I can't even work out where the motor is.
23:08
Speaker 2: It's complicated. So basically what I really need is I
23:12
Speaker 2: need the car equivalent of getting your car service, putting
23:16
Speaker 2: the right fuel in it, and generally looking after it.
23:18
Speaker 2: With money, I simply want people to say I've got
23:22
Speaker 2: a sense of safety. I understand if someone rings me,
23:27
Speaker 2: I don't care who they say they are. I am
23:29
Speaker 2: independently ringing my bank or whoever it is, on a
23:33
Speaker 2: number that I find, not a number given to me
23:36
Speaker 2: by the person on the phone, even if it's your bank,
23:38
Speaker 2: doesn't matter. Basically, so what I'm looking for is I
23:43
Speaker 2: look great Australian saying, I'm looking for people to swim
23:46
Speaker 2: between the money flags, to have a sense of personal safety.
23:50
Speaker 2: And that is anyone ringing you, anyone calling you, anyone
23:54
Speaker 2: pulling you up on the street, anyone telling you can
23:56
Speaker 2: double your money in twelve months. We need a personal
23:59
Speaker 2: sense of safety, which says that must be nonsense, that's
24:02
Speaker 2: truly crazy. But above all, to go forwards, we need
24:06
Speaker 2: to be able to say the reason I'm going forwards
24:09
Speaker 2: is not because I bought a property that doubled in
24:11
Speaker 2: value or a share that look at that happens over time.
24:13
Speaker 2: That's wonderful, good luck to you. But I want people
24:16
Speaker 2: to able to say I'm going forwards because I spend
24:20
Speaker 2: less than I earn and I put an amount aside
24:23
Speaker 2: on a regular basis to either repay debt, build a
24:26
Speaker 2: house deposit, or buy a few shared I don't much
24:29
Speaker 2: care what people do, because if you actually spend less
24:32
Speaker 2: than you ere, it doesn't really matter. James. It brings
24:35
Speaker 2: financial literacy alife.
24:37
Speaker 1: You can't you can't lose. No, you cannot, you can't lose.
24:40
Speaker 1: It's a very good point. I suppose. The only thing
24:43
Speaker 1: parallel with that is to avoid losing, to avoid losses
24:47
Speaker 1: as an investor, and that is a question of disposition,
24:51
Speaker 1: I suppose, and scale. But it's a very good point,
24:53
Speaker 1: and it brings you back to that idea. You look
24:54
Speaker 1: at the start this language of money, and you were
24:57
Speaker 1: saying that if you swim between the flags, then you
25:00
Speaker 1: should be said. And I suppose the other part of
25:02
Speaker 1: that is being able to articulate what you want to
25:05
Speaker 1: the person at the other side of the table or
25:08
Speaker 1: in the court center who says, whatever it might be
25:12
Speaker 1: that would seem to be stopping you or blocking you
25:14
Speaker 1: from not getting the best, You're not necessarily trying to
25:18
Speaker 1: pull off a magnificent sort of stealer anything. You're just
25:21
Speaker 1: trying to not be ripped off. Isn't that? It? Really
25:24
Speaker 1: isn't that? It?
25:25
Speaker 2: Well, it is, But there's a bunch of new skills.
25:27
Speaker 2: I've got My youngest daughter's thirty one. She's a smart
25:29
Speaker 2: young lady. Master's great UNI blah blah blah. But she
25:32
Speaker 2: was able to buy through spending lessons. She an opportunity
25:36
Speaker 2: to buy a little apartment in Melbourne, and she was
25:38
Speaker 2: about to send the deposit to a lawyer and I
25:41
Speaker 2: just said, now, let's just sit down on this. And
25:44
Speaker 2: so she got all the numbers and they all look right.
25:46
Speaker 2: I said, now let's not do this. Let's ring the
25:47
Speaker 2: lawyer and confirm the bank count details. Yeah, that's a
25:50
Speaker 2: good idea. So rang the lawyer, confirmed the bank count
25:52
Speaker 2: details with the admin purople there, sent them one hundred dollars,
25:56
Speaker 2: got them to ring to say and that it didn't
25:58
Speaker 2: get them to ring. Sorry. She then rang them again
26:01
Speaker 2: on on their number to ensure they've got one hundred
26:04
Speaker 2: dollars and then she set off the ten percent deposit
26:07
Speaker 2: to buy the property. Now, a very smart thirty one
26:09
Speaker 2: year old girl who's grown up in a financial litererous house.
26:12
Speaker 2: She said to me, said, cheek, dad, that was really smart.
26:14
Speaker 2: I probably should have thought of that, shouldn't I. So
26:16
Speaker 2: some of this stuff is this is this sense of
26:19
Speaker 2: your I know, I'm using corny Australian analogies, this swim
26:22
Speaker 2: between the flags and a life jacket and stuff. But
26:25
Speaker 2: the thing you can't afford, particularly as a thirty one
26:27
Speaker 2: year old, to lose that ten percent deposit for her
26:30
Speaker 2: would have been a financial catastrophe. And so she did
26:34
Speaker 2: spend the extra ten minutes making a couple of phone calls.
26:36
Speaker 2: But if you look at a couple of extra phone
26:38
Speaker 2: calls to protect a ten percent deposit, that's one of
26:41
Speaker 2: the cheapest investments she's made in the life. It's that
26:44
Speaker 2: sort of stuff James's. And it's not the sort of
26:47
Speaker 2: stuff that comes obviously, and many of the people have
26:50
Speaker 2: been ripped off on sending their deposit to an intercepted
26:52
Speaker 2: email of the wrong solicit's account number. These aren't Dune people,
26:56
Speaker 2: James they're just not used to the idea of how
26:58
Speaker 2: sophisticated fraud become. So you know, you kind of need this.
27:02
Speaker 2: I've got to spend lesson I earned and invest the rest.
27:05
Speaker 2: Then you work out just fine over the decades, if
27:08
Speaker 2: someone offered you an investment miracle, it's certain to be
27:10
Speaker 2: a rip off. But unfortunately this day and age, and
27:13
Speaker 2: it makes me sad to say this, James, you can't
27:16
Speaker 2: really trust anyone with your money unless you're certain it's
27:19
Speaker 2: a verified source. And I'm sad to say that.
27:22
Speaker 1: Yes, and it's so important. And one of the things
27:24
Speaker 1: in financial I thought, one of the most amazing things
27:26
Speaker 1: I found out in financial literacy was that when you
27:31
Speaker 1: and I have a sense of at all, not just
27:35
Speaker 1: that we learned how they routed, but two life experience.
27:38
Speaker 1: To give you an example, they did a survey in
27:40
Speaker 1: the UK where they found that many people under fifteen
27:44
Speaker 1: didn't trust banks. But when they investigated, what they discovered
27:49
Speaker 1: was they really know what banks were. They've never been
27:52
Speaker 1: in a bank, and you and I think of a
27:54
Speaker 1: bank as a big, solid building with big solid doors,
27:57
Speaker 1: and there was a security in that. But this new generation,
28:01
Speaker 1: I find that these are almost notions to them. So
28:05
Speaker 1: if they're only notions, then obviously the different a completely
28:10
Speaker 1: different frame of reference. And I think that's probably what
28:13
Speaker 1: financial literacy has to do all the time. It has
28:15
Speaker 1: to constantly update.
28:16
Speaker 2: You've got to make money real for the young people.
28:18
Speaker 2: I mean, we got a wonderful one in one of
28:19
Speaker 2: the focus groups for the Financial Literacy Board many years ago.
28:23
Speaker 2: In a focus group and a five year old said
28:25
Speaker 2: to us some, oh money, Money's easy. If you want
28:28
Speaker 2: to get money, you just buy stuff. At the room
28:31
Speaker 2: stopped and joege charming young kid in a very fun,
28:35
Speaker 2: safe environment. Every almost have a bit of a chocolate
28:37
Speaker 2: clear that we were just obviously we're not teachers, We
28:39
Speaker 2: were just sitting listening. And the teacher handling the session
28:42
Speaker 2: beauty said so how do you get money buying stuff?
28:45
Speaker 2: And the little five year old said, well, silly, I
28:48
Speaker 2: go out with mommy and daddy and we go to
28:50
Speaker 2: the supermarket and we get a trolley of stuff, and
28:53
Speaker 2: when we get to the counter to get our stuff,
28:55
Speaker 2: they give us money. In other words, what mum and
28:57
Speaker 2: dad have done is quite sensibly they needed cash to
29:00
Speaker 2: buy fish next door or something whatever it might be.
29:02
Speaker 2: Get the shoes done. So Mum and Dad have said,
29:05
Speaker 2: thanks for all the gracetries, could we have one hundred
29:08
Speaker 2: dollars with that A Now I'm laughing my head off
29:10
Speaker 2: about this, but there's a deep truth here and a
29:13
Speaker 2: role for parents and grandparents. Schools can't do this. A
29:16
Speaker 2: role for parents and grandparents is and I do this
29:18
Speaker 2: with our grandkids at two to seven, and I'm making
29:22
Speaker 2: a vicky of myself and making a real effort to
29:24
Speaker 2: make money real for our grand kids. Like Mum and
29:27
Speaker 2: Dad have taken them to a bank to get a
29:28
Speaker 2: bank account set up, and no good of the two
29:32
Speaker 2: year old. The two year old would just suck on
29:33
Speaker 2: a twenty dollar note, but the seven year old was
29:35
Speaker 2: so thrilled to get this strange thing called twenty dollar note.
29:38
Speaker 2: And she's scurried off to a bank and very carefully
29:40
Speaker 2: put her physically gone to the bank with a twenty
29:43
Speaker 2: dollar oat. And you need a bit of time to
29:44
Speaker 2: do this. She's put her twenty dollars into a savings account.
29:47
Speaker 2: She's going to get a kid's rate of interest, and
29:49
Speaker 2: she does look online because she's got some sort of
29:51
Speaker 2: five percent bonus kids save her account. Her twenty dollars
29:55
Speaker 2: plus another birthday and Christmas money. It's growing in value
29:58
Speaker 2: each month, and one of the things he likes to
30:00
Speaker 2: do is look at her app to see how to
30:02
Speaker 2: see how much he's money, so she's it sounds like
30:08
Speaker 2: a silly example, but money is no longer real for
30:11
Speaker 2: this generation. Teachers are going to struggle to do this.
30:14
Speaker 2: We parents and grandparents need to make money real for kids.
30:19
Speaker 2: And the other thing we got to do is we've
30:20
Speaker 2: got to get over ourselves. Money is still a bit
30:23
Speaker 2: of a tabooz subject in the family home, and whether
30:26
Speaker 2: you're good or bad with money, sharing age appropriate experience
30:30
Speaker 2: with your kids is invaluable. I have many kids who
30:34
Speaker 2: email me a money magazine. Many of them start with
30:37
Speaker 2: my mum and dad were not good with money, but
30:40
Speaker 2: I understood and learned from this and as a result,
30:43
Speaker 2: So if you're finding money a bit tough, but don't
30:46
Speaker 2: frighten your kids for Eaven's sake. But we're not good
30:49
Speaker 2: at having transparent conversations at the right time in age
30:53
Speaker 2: appropriate at that point, telling me two year old in
30:55
Speaker 2: age appropriate language, and in particular, if the kids ask
30:59
Speaker 2: you a question about can we have a better car
31:01
Speaker 2: or why an't we go on holidays this year. It's
31:03
Speaker 2: a wonderful opportunity to really term financial literacy into the
31:07
Speaker 2: words you use, your financial capability, because there's nothing like
31:11
Speaker 2: kids and grandkids understanding we all have limits, we're all
31:15
Speaker 2: trying to get by, and it's too often we just say,
31:17
Speaker 2: you know, this might scare you, or you're too young
31:20
Speaker 2: or whatever. You've got to be appropriate. But g if
31:22
Speaker 2: Australians spoke more about money in an appropriate fashion with kids,
31:27
Speaker 2: that would help the cause.
31:28
Speaker 1: No end, James, Okay, very good, Well we'll make it real.
31:31
Speaker 1: I hope that was useful to you books. I think
31:33
Speaker 1: it was really good insight into this issue. And as
31:37
Speaker 1: I say, if you're listening to the show, the chances
31:39
Speaker 1: are that if you're not financial literacy, it will be
31:41
Speaker 1: pretty soon. But what about people around you, in your family,
31:45
Speaker 1: your wider circle. You see it all the time. I
31:47
Speaker 1: see it all the time. You see people who are
31:49
Speaker 1: heading for trouble all the time. This is the opportunity
31:52
Speaker 1: that we have in front of financial literacy ncial capability
31:55
Speaker 1: in its widest sense. Paul Clitheroal, Chairman of the Extra
31:59
Speaker 1: founder the Financial Literacy Foundation, thank you very much. For
32:02
Speaker 1: being on the show today, My pleasure. Titteral folks. Okay,
32:06
Speaker 1: keep those emails rolling. Please at the money puzzle at
32:09
Speaker 1: the Australia dot com dot au. Talk to you very soon.
32:13
Speaker 1: Today's show was produced by Leah Sammagreen.