Jack Goldingham Newsom discusses the financial education curriculum.
What is it about financial education that makes it effective? It is based on assumptions including individual ownership, for-profit business, rational decision making, and viewing oneself as a consumer who manoeuvres in the economic spaces by finding the best deals Interestingly, those who already share the assumptions of the financial system are much more likely to take and use the financial education programmes that we have in New Zealand.
But what about those who come from cultural backgrounds where individualism isn’t at the heart of their worldview, such as Māori and Pasifika people? What about those for whom putting together at least $200,000 for a mortgage on a house is unrealistic? What about the fact that each purchase of a plastic good, a new car, an air-conditioning unit, is sending us closer to environmental oblivion and an estimated 5 degrees of warming by the year 2200? What about the fact that when we want something, we don’t research all the options because we’ve already formed our tastes and preferences based on things other than a budget?
Well, what about all of that? For many students passing through financial education systems at the present time, this is their reality when they leave school. They are not homo economicus as their economics textbook might tell them; rather they are complex and embedded relational beings who are always in and responding to their environment.
It seems fairly clear to me that teaching students how mortgages work for their future nuclear family to buy a house, and how to invest $100,000 on the share market, leans heavily on a reality that just will not exist for many people. Those things are unattainable and unrealistic, and to be teaching these skills as ‘normal behaviours’ is setting students up to fail when, despite their hard work, they cannot achieve these goals through no fault of their own.
If the point of financial education is to prepare students for the financial environment they will be in after school, and to lead to futures of high financial wellbeing (recognising that this doesn’t mean everyone is rich, rather that everyone is relatively satisfied and able to respond to financial changes), then we cannot continue teaching this.
I’ve been doing some research into what this financial reality might look like. It became clear that we are not always rational and we do not always have rational preferences among a given set of outcomes. We sometimes make emotional or moral decisions. Optimisation of utility and profit are not our only goals as consumers; rather, we strive for equality, political justice, ecological respect, and to maintain the environmental conditions necessary for life, within the resource limits.
We do not act independently in an empty space; rather, we act within an environment, which includes friends and family, culture and religion, advertising and media, and more. Our desires and our interaction with financial products and services do not always come from individual will, but from cultural and social practices, and, as is largely the case with Māori and Pasifika communities (but also with other cultural groups), the financial offerings themselves are not aligned with the cultural principles and expectations that form these worldviews.
Therefore, I want to propose that wee rethink financial education based on three changes to our knowledge and our environment:
1) Changes to people’s current financial situations and financial prospects.
2) Changes to our understanding of the importance of ecological and social factors in purchasing decisions, and the role of cultural factors in access to financial products.
3) Developments in our knowledge of how we make decisions.
If the financial reality of saving, investing, and insurance is changing, we can’t keep teaching last century’s financial education curriculums. If we know more about how our decisions are influenced by cultural factors, and that our decisions have a huge impact on our natural environment, why are we still doing ‘Buy a Car’ worksheets which often don’t put emphasis on the emissions of these cars, or the option to not participate and take public transport instead?
If we know that we don’t make decisions by using tables and budgets most of the time, but rather based on shortcuts that our brains have developed through our experiences, why aren’t we teaching students to get to know these shortcuts instead?
To avoid the charge of seeming a little too radical, I want to point out that economic models have moved on too, so there’s no reason to be stuck with the neoclassical assumptions that remain at the heart of our current financial education. The New Zealand Government now publishes a Wellbeing Budget which measures progress with indicators complementary to GDP, such as health and wellbeing.
Kate Raworth has developed an economic model which puts ecological limits and social needs at the centre of concern; a model which is already being used by the city of Amsterdam to guide its development. An article in The Spinoff interviewing Teahooterangi Pihama, the Head of Māori Advisory at Kiwibank New Zealand, notes that he laments the fact that banks don’t offer culturally supportive advice and options to their Māori clients, leading to worse financial outcomes among this group.
All the knowledge is there, all the signs are pointing in a different direction, and the financial education space is where we can make the biggest difference to the financial wellbeing outcomes of the youth of today. If they learn about the means they have to influence the market, and to act collectively, in ecologically and socially considerate ways, then we will be taking the responsibility to prepare our youth for the future that they will inherit seriously.
To end this brief opinion piece, I want to show you what I mean: how about this as a worksheet scenario in our new financial education?
Jimmy’s mother wants him to tidy his room. He has enough money to buy 10 new plastic boxes, but he chooses to make two out of wood instead, and learn carpentry skills from his koro along the way. He takes the risk of not having 8 spare plastic boxes the next time he needs one, but knows he’ll be better able to make a box next time, and the ecological impact of the wooden boxes is much less than the plastic ones. They’ll last his whole life, and he will have the memory of working with his koro, who also teaches him about care and effort in carpentry. Jimmy understands that the best decisions are ones that optimise price/resources, but also ecological and social costs and benefits.