By Craig Keary, CEO of Selfwealth
With the Australian Shareholders’ Association, Craig Keary, CEO of Selfwealth, unpacks the intergenerational wealth shift and why it should matter to all of us. To do this, a new framework is being introduced: ‘FAMILY.’ In this simple acronym are the six key elements considered crucial to a successful intergenerational wealth transfer.
F: Financial literacy: Educating younger generation on managing and growing wealth.
A: Assets management: Structuring and safeguarding assets for future generations.
M: Multigenerational planning: Addressing the needs and goals of family members.
I: Inheritance strategy: Clear outline for equitable and tax-efficient distribution.
L: Legacy preservation: Upholding family values and long-term financial stability.
Y: Year-round collaboration: Continuous engagement with financial advisers.
We begin with the first letter, F: for financial literacy. In future chapters, this series will explore how individuals and families can build, preserve, and transfer wealth across generations.
The significant financial literacy gap
‘Financial literacy’ pertains to the set of skills, knowledge and behaviours that can empower a person to make informed financial decisions throughout their life. Unfortunately, there is a significant financial literacy gap in Australia, many Australians are considered financially illiterate.
around 8.5 million adults (or nearly 45% of the population) are considered financially illiterate. There is also a notable gender disparity: 63% of Australian men have basic financial skills, compared to just 48% of women. This gap is even wider for young people, where only 28% of teenage boys and just 15% of teenage girls demonstrate essential financial literacy.
With a gap so significant, it’s critical that young people are provided with accessible financial education both at home and at school, particularly within this ever-changing economic landscape with its growing complexities.
Though it’s easy to see the potential personal impact of low financial literacy, this is a problem that also has broad social and economic implications. One address by a former governor of the Reserve Bank of Australia notes, “any market economy will function much more effectively if the population is knowledgeable, forward-looking and financially literate.”
Providing young people with a solid foundation in financial literacy is a gift that will reward them for life, while also providing benefits that extend to households and communities.
The role of formal education
Something as critical as financial literacy calls for innovation to drive improvement. A multi-pronged approach is needed. Of course, one avenue for this is through schools. No school curriculum is complete without covering some basic principles of financial management and numeracy. The main subject where finance will arise is in mathematics, but finance can be a relevant topic across a wide range of subjects including the humanities and more specialised subjects.
Educators can access resources from the ATO’s school education program online, as well as useful resources and classroom tools from ASIC’s moneysmart.com.au, which can guide lesson plans and inspire topics for discussion.
The role of families in financial literacy
Families have a crucial role in raising the next generation to be financially literate. Many parents choose to actively involve their children in day-to-day financial management. In this way, the household budget, weekly shopping, and bill paying become valuable learning opportunities that help make financial concepts more tangible.
But beyond these basics, teenagers and young adults are navigating a complex financial – at times risky – landscape. The significance of personal and credit card debt remains a vital topic for parents to educate their children on.
As a result of technology, including social media and online advertising, children are exposed to many potential financial dangers that can appear innocuous. The emergence of buy-now-pay-later platforms is another development known for targeting a younger and more vulnerable demographic and is something that their parents’ generation never had to grapple with.
Financial education should be ongoing; the key to successful financial education, whether within the family unit or in the classroom, will be keeping discussions open and engaging. Providing opportunities for open conversations and financial discussions in the home is the best way to build the confidence young people need to be able to handle financial decisions as they mature. This open dialogue will also open the door for questions and normalise the subject from an early age. With a handle on financial basics, as well as today’s more nuanced financial complexities, young people can start their financial lives on the right track, confident and with a solid base of financial literacy.
The information has been prepared without considering the objectives, financial situation, or needs of any individual. For this reason, any individual should, before acting on this information, consider the appropriateness of the information, having regards to the individual’s objectives, financial situation or needs, and, if necessary, seek appropriate professional advice.
This article is brought to you by Selfwealth, a proud partner of the Australian Shareholders’ Association.
