All Eyes on Australia as Financial Literacy Program Winds Down
By Dan Kadlec
October 24, 2017
Few countries have tackled financial literacy more aggressively than Australia, where schools must provide a class in money management. Yet financial capability appears to have slipped, research shows.
The global financial literacy push has deep roots, and it got a huge boost after the Great Recession. The idea was that a little more knowledge about mortgages and compound returns would help keep the world from falling into another financial crisis.
Yet an Australian study found that five years after the recession the number of adults able to recognize an investment that was too good to be true—say, a bond with low risk but an extremely high yield—had edged lower, to 50% from 53%.
The study also found that those who understood that even good investments almost always fluctuate in value had fallen to 67% from 74%. Meanwhile, an Australian Productivity Commission survey found that 22% of adults have low numeracy skills and are not able to understand the effect of an interest rate change on their variable-rate loan payment.
These studies are a few years old. But they came well after the recession had ended and Australia and others had formalized a national strategy for financial education. Down under, this is of concern now because the nation’s formal strategy is authorized only until the end of the year. Critics may point to such findings and say, why bother?
One answer would be that it is much too soon in this effort to give up. Researchers are unlocking more effective teaching methods every day. And some decline in financial literacy was to be expected once the crisis passed and individuals were less focused on the issue.
The response in Australia bears watching. A leader in the space, it must now grapple with tepid results and an expiring national strategy. No one expects the government to give up. Let’s see what new twists they bring to the mission.