OPINION: Financial illiteracy is often the first thing blamed when investors get ripped off or hoodwinked. Because we are not taught money basics at school and financial media and communications can be a bit "once over lightly", investors can find themselves being led down the wrong path.
I've always had a real interest in financial education and a desire to instil the right money attitudes in as many New Zealanders as possible, from as early an age as possible. In the past I've spoken to schoolchildren, and to parents and grandparents in the hope that they'd develop good money habits and pass them on. But it's a long, hard process and in many instances the financial literacy of the adults is not adequate for them to be good role models for their children.
Financial literacy is more than just understanding the relationship between risk and return, or figuring out the power of compounding. It is as much about having a questioning mind and knowing what questions to ask.
How refreshing it was to read about schools and universities in the US that used the recent presidential debates as "teachable moments". I love that phrase - life is surely full of teachable moments.
For most Americans, the presidential debates have provided entertainment value. They've also provided a confidence boost for both Obama and Romney supporters, depending on who was declared the winner at the end of each debate.
When the dean of Lynn University's College of Business and Management learned that a presidential debate would be hosted on his campus, he looked beyond entertainment value. He vowed to ensure the debate had a lasting impact on the school's 1000 students rather than it just passing as an eventful day.
So students have for months studied the economic policies of the presidential candidates and their implications for the US economy as a whole. They've also considered the impact of the policies on their prospective career field if either candidate was elected.
Accounting students have studied campaign issues and the tax consequences if the candidates' preferred policies come into effect. Other students have examined the candidates' leadership styles and the campaign finances and effectiveness. Finance students have simulated investment portfolios for the class and analysed the impact the economic plans of each candidate would have on the value of their portfolios.
Importantly, at the end of all this study, the students have been able to attend the debates, understand what is going on, form and amend their opinions based on a full understanding, and fact-check the statements made.
As one professor noted: "It has opened their eyes to what realistically can and can't be done, and how much of what the candidates are talking about is actually bluster."
Imagine if our students, indeed our population at large, applied the same rigour ahead of elections, Budget announcements, referenda, hui, law changes and Reserve Bank announcements. Imagine if every new investment opportunity, IPO, investment seminar and bond offering was treated as a teachable moment.
Financial literacy would develop without us even trying.
Carmel Fisher is managing director of Fisher Funds, an investment manager and KiwiSaver provider.
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