Spend Some, Save Some, Invest Some

March 28, 2018 at 8:52 AM

Lose some.

  1. If you spotted a dangerous animal in your vicinity, what would you do?
  1. If you know that inflation forecasts were one per cent lower than actuals and commodity bundles would cost two per cent more than expected, would you know how much to save each year so that the quality of life in your retirement is not compromised? 

Most young people would have a ready answer for the first question, but they would not be alone in being bamboozled by the second! Even adults can have a thin grasp on how they can make their money work for them. In prehistoric society, knowledge about the first question was essential - the animal could feed or harm you. For almost identical reasons, fiscal knowledge holds equal importance in this century! 

Today’s children are growing up in an increasingly complex world and are facing their first financial experiences in vastly different ways from earlier generations. Once, weekly pocket money entailed handing over the weight of coins to count. Nowadays, it’s almost unusual to handle hard currency as the world moves towards a cashless society. The rattle of a child’s piggy bank is now replaced with an online account. 

It is said that our brains do not record credit card spending or online shopping in the same way as when we stand at a cash register and feel the weight of our purchases and hand over cash. Our children watch us tap or insert a card at the checkout, with little understanding that money is being moved, or how their parents came to afford the payment. 

Today, a young child with a smartphone in hand, may access iTunes or a gaming app online and with the tap of a button, inadvertently make a purchase. 

Currently, across the major cities of the world, the younger generation are facing extreme difficulties trying to get their finances in order to get a toehold on the property ladder; the repercussions, as this generation ages, is yet to be felt, but there is a growing urgency to ensure that our young people become fiscally aware. 

Financial Literacy is a core life skill, for today’s children will eventually take charge of their own financial future. As young adults learning to live independently, they will need to know how to budget and make wise financial choices for everyday living, how to manage risks, save for a ‘rainy day,’ avoid taking on unmanageable debt, and provide for their old age and health care. Poor financial decisions can have a long-lasting impact on individuals, their families and society. 

Financial education can empower and equip young people with the knowledge, skills and confidence to take charge of their own lives and build a more secure future for themselves and their families. 

With this in mind, the ‘Innovations’ programme at the Boys’ School offers Financial Literacy as one of its options, with the focus on guiding the boys in ‘wise decision making’ around financial activities. However much we have, whatever we want to spend, wherever we want to go, we have to make decisions. 

The boys have discussed many aspects of money from their own pocket money, to budgeting, affording discretionary purchases, to investing for their future. As an exercise, they each planned a holiday for a family of four within a given budget, taking account of every aspect of the trip from getting to the airport, flights, accommodation, meals and trips. They came to understand that budget constraints changed their thinking from where they would like to go, like to eat and do, to where and what they could afford. 

Many boys have their own savings accounts and a developing awareness of the amount of interest their account is accruing. They are also learning about compound interest and how savings accelerate over a longer period of time. Discussions around investing in other areas to grow your money faster, and the risks and returns associated with this, led to the boys visiting the NZX – the New Zealand Stock Exchange.

In the movies, stock exchanges are crammed with men frantically yelling and waving, with phones clamped to their ears as numbers rattle over on big screens. The reality is a little more sedate, as in the early 90’s NZ from an ‘open outcry floor’ to electronic trading.

Their hosts for the morning caught the boys’ attention immediately, using lollies to represent share trading! Questions came thick and fast about whether it is possible for a school boy to get into trading. Mentally, pocket money was quickly getting reassigned! 

Back at school, the senior boys have encountered the uniquely Kiwi board game, ‘Market Share’ and with new-found enthusiasm, set about considering strategy, risk management, budgeting, asset planning, negotiation and cash flow to gain and grow shares. 

If you follow the financial news, you'll hear that the sharemarket rose, fell, soared, plummeted, sank, dipped, stalled, rocketed, tanked - or sometimes did nothing at all. It might be a bull market or a bear market. If you’re a little confused by these terms, ask a boy in Year 7 or 8!

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