Why kids should learn about credit in the classroom
Last year, we teamed up with Banqer, a web based financial education platform for the classroom, to launch an interactive credit module. Designed to complement the existing modules such as bank accounts, income, insurance and savings, its aim is to educate Kiwi kids on the pros and cons of credit.
In just one year, more than six and half thousand students have used the credit module in New Zealand, with 225 primary schools engaged. That means we’re already well on the way to a future of more credit-savvy individuals.
To mark International Financial Literacy Month, we interviewed Banqer’s co-founder, Kendall Flutey about the roll out of the credit module in New Zealand classrooms.
Equifax: When you go into classrooms that are using the credit module, what are students excited about sharing with you?
Kendall: They’re very keen to tell us is their net worth and credit scores. They take great pride in their credit scores and work had to make smart decisions to keep improving it over time.
Equifax: Wow, that’s a pretty impressive conversation to be having with students as young as nine.
Kendall: Absolutely, the credit module’s achieving exactly what we wanted it to. Students can take out simulated personal loans and mortgages and learn about the importance of being able to meet their repayments. They can see the real-life implications of their financial decisions and get to grips with their credit-worthiness.
Equifax: Is there an ideal age to introduce the concept of credit to young Kiwis?
Kendall: We need to ensure that students understand debt broadly speaking, and the power of compounding interest before we introduce them to credit. It could be students as young as nine to 13 years old. So long as they have that foundational knowledge, they’re ready to take on the responsibility of personal lending and learn about a credit report.
Equifax: Why is it so important to teach our kids about credit from an early age?
Kendall: By the time this generation faces real-life financial decisions, they’ll be dealing with more sophisticated lending products and increased exposure to available credit. The consumer culture that drives many in my generation to purchase on credit will be further influenced by social media and the lifestyle that many young adults now live. We need to make sure that young people are prepared.
Equifax: Does the credit module also teach students about how to rebuild a credit history, if they’ve got themselves in trouble financially?
Kendall: Yes, learning how to improve or rectify their credit score if they’ve made a bad decision is crucial. We want them to make some mistakes, so they can understand the relative ease of getting into debt and the real cost of borrowing, even when it comes to modest loans.
Equifax: Some studies suggest that children have formed rigid habits by the age of nine, and that these are likely to impact on their adult life. Is early education the answer?
Kendall: Financial behaviours form really young, and these somewhat shape your future financial self. They’re really stubborn to shift in later life, so early intervention is key, especially with respect to financial literacy.
Our entire financial system has gone through a digital transition in the last few years and it’s unlikely that future generations will be dealing with cash or cheques. Instead they’ll be grappling with a cashless society and new financial technology. By immersing students in this kind of financial world now, they’ll be prepared for what’s ahead.
Equifax: How do we teach kids about building a good credit score without encouraging them to borrow?
Kendall: There’s other ways to build a good credit score like establishing utility accounts and making your payments on time, but ultimately knowledge is power.
By equipping our young with the knowledge and experience they need to thrive financially, they can choose how best to influence their credit scores in ways they’re comfortable with. Credit cards and loans are part of that equation, and we hope that all Banqer kids who get to explore the concept of credit will have a plan to implement as adults. The worst thing we can do is to not educate and disengage with this topic, even though it may be confronting.
Equifax: In terms of financial literacy, what would you like the Banqer legacy to be?
Kendall: If we fulfil our mission I believe Banqer can leave a legacy that continues to shift the financial trajectory of future generations. Through increasing financial capability we’ll see New Zealanders living wealthier lives, in the broader sense of the word. This will look like higher employment rates, stronger investment, and a thriving economy.