School curricula are regularly revised mainly to reflect the changing needs in the workplace. But one subject that is often lacking in the curricula of schools is personal finance.
This trend is changing in some countries as the importance of managing finances is of critical relevance to most people.
The Organisation for Economic Co-operation and Development (OECD) conducts regular surveys to find out about the ability or otherwise of people to manage their finances. A 2018 local study commissioned by the Family Ministry and modelled on the OECD survey revealed varying degrees of this skill among the Maltese.
One encouraging finding was that 93 per cent of Maltese are active savers while 72 per cent of adults say they could face a significant expense equivalent to their income without seeking help or a loan. Almost all could pay their bills on time.
Less positive findings are that 55 per cent say they do not have any financial goals, while 45 per cent do not have a retirement plan. Many in the elderly cohort were found not to keep track of their finances and a lot of the young said someone else made day-to-day spending decisions for them.
The cornerstones of financial literacy can make the difference between living without the constant fear of losing financial independence and being forever anxious about how to pay the next utility bill or car repair. Sound personal finance skills, like most other life skills, have to be learned as early as possible to make people’s lives less stressful. It is the right time to make personal finance a mandatory subject in secondary school curricula.
Today, most young people learn personal finance skills mainly from their parents. The cornerstones of personal finance are easy to understand but difficult to embed in the mindset of young people. Personal finance involves learning concepts and applying specific strategies to take you through life.
A first important concept is that of the importance of earning money. Children need to understand from an early stage that money does not grow on trees. For most people, this means having to work and save to help finance our dream projects.
We live in an age of instant gratification. Many have no inhibitions about spending money even before they have earned it. This is good news for businesses that depend on consumer spending but not so good for those who may find themselves unprepared to face a financial crisis in their lives.
Postponing consumption today to be able to spend tomorrow is a viable insurance against financial anxiety when unexpected bills are delivered to our homes.
Borrowing money is an experience most individuals get familiar with at some stage in their lives. Financial service companies flood the market with offers of credit for consumption and for the purchase of durable assets like houses. Distinguishing between how much one can afford to borrow and building an unsurmountable debt mountain is an acquired skill that is honed through years of experience.
Young people rarely think about the importance of investing for their retirement, even when they see their parents struggle to make ends meet when they become pensioners.
The concept of putting money aside and see it increase over time through price appreciation or compound interest could save many young people from financial stress when it is time to retire.
Sound financial planning will always be as critically important for supporting the personal lifestyle we aspire to as it is for supporting major infrasctructural project.