“I was stunned when I saw that we had retreated,” said the deputy director of the HILDA survey, Roger Wilkins.
Respondents aged 45 to 54 and 55 to 64 scored the highest with 4.1. But that’s still lower than the 4.2 that both age groups got in 2016.
Mr Wilkins noted that the decline coincided with a drop in the rate of high school students studying economics in Australia. The Reserve Bank of Australia (RBA) has seen a “dramatic” 70 per cent drop in Year 12 Economics enrollments in the three years to 2020.
A 2017 study from the RBA found that fewer than 10 per cent of NSW Year 12 students studied economics in 2016, down from 40 per cent in 1991, when economics was the third most popular subject after maths and English.
There is also a surge in “magic thinking” around the currency that coincides with relatively favorable economic conditions – at least until 2020, Mr Wilkins said.
“Young people have not been exposed in recent years to these pitfalls that we, as people who work in this field, take for granted.”
He gave the example of the concept of investment diversification. While it may be intuitive to those in the industry that spreading investments across multiple stocks and assets reduces risk, to many Australians, the concept of investing in multiple items may seem too risky because many places to watch.
Barriers to learning
University of Sydney economics and law student Grace Lagan said falling financial literacy levels concerned her “a lot”.
The 20-year-old student, who grew up chatting about the economy and current affairs with both of his journalist parents, worries that his generation is inundated with ‘buy now, pay later’ products. g will find it difficult to develop good financial habits.
He also believes that young people face major barriers to entering the housing market, but lacks financial education in schools.
Ms Lagan was drawn to economics after her mother gave her an explanatory book on economic principles titled What Happened to Penny Candy? when he was eight years old.
But he knew his experience was unusual.
“In terms of information [around money]a large amount of it from my family,” he said.
However, he also learned a lot from an economics teacher who helped him and his class understand the challenges of credit card debt, and how to choose a superannuation fund when they got their first job. .
Although she thinks schools may struggle to adapt the financial curriculum to keep up with financial products and trends, Ms Lagan says embedding at least some learning in schools is key to improving financial literacy among young people.
“I don’t think you can have a compulsory super scheme and then not give people any information about how you make sure you direct all your super into that account,” he said.
“I worry that a group of people have less financial knowledge than the generation above us. And I believe that even when you’re young, there are still decisions that have lifelong ramifications.
“The number of my friends who move from casual job to casual job and never consolidate their super worries me because they have eight different super accounts.”