Incorporating financial literacy into schools’ curriculum from an early age allows children to acquire the knowledge and skills to build responsible financial behaviour throughout each stage of their education, writes Obinna Chima
Financial literacy is a core life skill for participating in modern society. Children are growing up in an increasingly complex world where they will eventually need to take charge of their own financial future.
National surveys conducted by the Organisation for Economic Cooperation and Development (OECD), had shown that young adults have amongst the lowest levels of financial literacy.
This is reflected by their general inability to choose the right financial products and often a lack of interest in undertaking sound financial planning.
That is why even from an early age, children need to develop the skills to help choose between different career and education options and manage any discretionary funds they may have, whether from allowances or part time jobs. These funds may entail the use of savings accounts or bank cards
Clearly, financial literacy lessons help kids grapple with the adult choices they already face as teenagers.
According to Investopedia, financial literacy is the possession of knowledge and understanding of financial matters. Financial literacy is mainly used in connection with personal finance matters. It often entails the knowledge of properly making decisions pertaining to certain personal finance areas like real estate, insurance, investing, saving (especially for education), tax planning and retirement. It also involves intimate knowledge of financial concepts like compound interest, financial planning, the mechanics of a credit card, advantageous savings methods, consumer rights, time value of money, etc.
In other words, financial literacy is the ability to make informed judgments and to take effective actions regarding the current and future use of and management of money. It is the possession of knowledge and skills by individuals to manage financial resources effectively to enhance their economic well-being.
Simply, it refers to ability to manage one’s available resources to be sufficient enough to provide both present, future anticipatory and contingent needs.
Recognising its importance, the Central Bank of Nigeria (CBN) recently disclosed that it had commenced discussions with the National Education Resource Centre to introduce financial literacy programs into the education curriculum of secondary schools in Nigeria.
It said once the discussions with NERC are finalised, financial literacy would be taught as a subject in all Nigerian secondary schools before the end of this year.
The CBN Director, Consumer Protection Department, Hajiya Umma Dutse, who disclosed this recently, stated that the commencement of the financial literacy program would assist in improving the savings culture among secondary school students.
According to the Pew Research Centre in 2006, 63 per cent of Americans acknowledged that they did not save enough and 36 per cent stated that they spent more than they could afford.
Catching them Young
Also, in a bid to further sensitise teenagers about the importance of financial literacy, the Deputy Governor (Corporate Services), CBN, Mr. Adebayo Adelabu, has stressed that whatever career choices children make, from medicine to engineering, from law to accountancy, from agricultural science to banking and finance, among others, a common denominator in their aspiration is ‘success.’
Adelabu, who said this in a in keynote address titled: “Financial Literacy: An Antidote to Career Success,” he presented at the 2016 graduation ceremony of the Lifeforte International High School, Ibadan, Oyo State recently, noted that every brilliant professional aspires to be successful in being able to be self-sufficient in catering for self, family and relations and also afford every good thing desirable in life.
He however pointed out that there have been stories of brilliant doctors, bankers, accountants, lawyers, engineers that ended their career as paupers and struggle through the rest of their later lives.
“It wasn’t because these professions did not earn them enough either as paid employees, or as self-employed, but they lacked good management of their financial resources. When I say financial resources, I mean money management. It is unfortunate that this topic is never taught anywhere, be it at home or in primary, secondary and tertiary institutions, but is the key to career success of these children.
“Poor money management or lack of financial literacy has made a lot of brilliant professionals end up as paupers. Studies have shown that less privileged children are in most cases naturally more financially savvy. This is due to the fact that they learn from their very early days how to manage the little token provided by their parents while attending public schools.
“Everyone needs money. Everybody spends money. This is true whether you earn money or not. From your first day in this school, till date, you have been spending money. From the moment an individual is conceived, he starts to spend money, although owned by others, just as you have been spending your parents’ money. This continues up till the moment the individual is no more. Even after he is gone, others also spend on him for caskets, burial expenses, etc,” Adelabu explained.
Continuing, he said: “It is now clear that the subject of money, which is relevant to every individual before he is born and after he is dead, should be of extreme importance to everybody. Money is something that you cannot do without or can anybody here tell me that he can do without money?
“But do they teach people enough about making money? Do they teach how to manage money in the primary or secondary schools or in our homes? How many young people understand how money works in the world or how to earn and manage or grow it? or how to donate money to help others? This whole process – understanding how it works, earning and managing it and also using it to help others – is known as financial literacy. It is even more important now more than ever before, given the current economic condition of the country.”
More about Financial Literacy
According to the deputy governor, CBN, financial literacy is not just about owning or operating a bank account, ability to use an ATM or PoS card, ability to make internet purchases or knowledge of mobile banking transactions, stressing that it goes beyond all that.
Not surprisingly, he noted that all life events are affected by how skilled an individual is in this area. “Some of those life events include buying a car, buying or building a house, renting a house, caring for a loved one, critical illness, death, getting a new job, losing a job, getting an education, getting married or divorced, having a baby or babies, inheriting money, life after school whether secondary or tertiary, planning for retirement, preventing your money or assets from being stolen, preventing fraud, raising a family, etc.
“How effectively or efficiently you navigate through all these life’s pressure is highly dependent on your financial literacy level or money management skills. It has been observed that the average student who enters a tertiary institution lacks the basic skills in the management of personal financial affairs. Families usually believe that their child will obtain this knowledge in school or at a later date in the future.
“Tertiary institutions on the other hand may also generally assume that the students were learning this within the family or at a previous school. How many here today received this knowledge from the family or the school? Can you let me see your hands up if you have received any formal teaching on financial literacy?” he queried.
Furthermore, Adelabu stressed that whether one is young or old, living in Lagos or London, there are standard principles that every individual must live by to achieve financial success in the areas of personal finance, commercial finance, or self-employment. He pointed out that if one cannot manage his or her income as a salary earner, there is the likelihood that such a person will also squander his or her business revenue as a self-employed.
He listed these standard principles to include: know your money personality – understand your personal comfort level with risk and financial loss, know your personal traits when it comes to money and determine your long term goals.
Secondly, in order to be financial literate, Adelabu said one must know what he or she is saving for and have a plan to get there; set financial goals; know their cash flow. Know how much you earn and how much you spend.
“It will surprise you that many people do not know how much they spend in a given period and it is funny when such people say that their money ‘just disappear’. Have a worksheet that records your income (from salary or self-employment) and expenses. There is no other way to save than ensuring that your expenses are smaller than your income or making your income bigger than your expenses.
The sooner you start saving, the better off you will be.
A Chinese proverb says that ‘the best time to plant a tree was 20 years ago. The second best time is now’. Start saving now. Little savings can add up to big amounts over time. The power of compound interest magnifies the power of savings over time. If you save N10, 000 every month at the rate of 10 per cent for 30 years, you would save the sum of N22.8million in 30 years.
“Again, it is important to be financially literate whether or not you are self-employed or an entrepreneur. It is also useful to stress the fact that success in your career is not an overnight success. It requires doing the right things and consistently keeps at doing them. This has been the ‘short-cut’ to success since time immemorial.
“Regardless of your career choice, whether you want to be a civil engineer or a psychologist, it is very important that you follow the standard principles of financial literacy in order to make your career a success. It is particularly useful to note that it is possible to be a very good medical doctor without being financially successful. Yet, it is possible to be a school teacher and be financially comfortable,” he added.
Continuing, he added: “Also, whether you are self-employed or an entrepreneur, or simply interested in personal finance, tax management is a fundamental aspect of your business. You must understand the most appropriate structure for your business and obtain useful advice on various forms of tax like personal income tax, company income tax, capital gains tax, etc.
“It is useful to know your exempted activities and transactions on which you can obtain tax reliefs, with a view to minimising your tax liabilities. Compliance with the relevant tax laws is very crucial as non-compliance is more costly. This makes you a responsible citizen.
“There is no gainsaying the fact that financial literacy is crucial to career success. It is in view of its importance that I strongly recommend that financial literacy be added to the curriculum of our schools at the secondary school level. Parents should also impart financial literary into their children and not merely ask them ‘do you think money grows on trees’? Students should also grab financial literacy education with both hands because it is critical for their career success.”