In this video, Peter Johnston talks about the importance of financial literacy and what we’re doing about it here at GMI.
What is financial literacy?
Peter Johnston, Content & Communications Manager, Gareth Morgan Investments
Financial literacy has been a bit of a buzzword over the last few years and probably there’s a lot of definitions that people have. To me it’s all about making informed decisions about your money, or being able to make informed decisions about your money. And it’s a combination of things; one is having the information available in the first place, and the other is being able to understand it.
How important is financial literacy?
These days financial literacy is really important. I mean, if you stop and think about it, there are so many things we have to make decisions about every day to do with our money. That’s things like student loans, mortgages, credit cards, hire purchase, joining KiwiSaver, what KiwiSaver scheme to choose… a whole lot of decisions that we have to make in our generation which our grandparents’ generation or even our parents’ generation didn’t have to make. So it seems as if, as the years go by, financial literacy becomes more and more important.
What do you think is the current level of financial literacy in New Zealand?
You often hear people in the media talking about New Zealanders having poor financial literacy. I don’t really know if that’s true or not, if it’s backed up by any formal research. I suspect there are areas that New Zealanders are quite clued up on, like mortgages, for example – we have a history of home ownership. But things like the share markets we are not so knowledgeable about, because we don’t have that same kind of culture of investing that some countries like the United States have.
There’s also a lot of discussion about whether New Zealanders have made the right preparation for retirement; whether we’re saving enough, and whether we’re doing the right things to ensure we have a comfortable retirement. So financial literacy is definitely a part of all that.
What could be done to improve financial literacy?
Well, I think everyone has a part to play in improving financial literacy. The government in terms of making sure the financial sector is properly regulated, and also with schools there’s been calls for making financial education part of the curriculum. The financial industry certainly has a part to play in making information more understandable and accessible.
But you as an individual do also need to make sure that you stop and take the time to be informed when you make a decision. It’s very easy, for example, if you’re in a shop and you want to buy that LCD TV and you see the interest-free sign there to just sign up, right then and there. But you really need to sort of just take the time, make sure you know what you’re getting into.
What is GMI doing to improve financial literacy?
Well, we work hard to make our information – particularly our written information – as understandable as possible, as clear as possible. And that can be a challenge with all the financial jargon that there is.
We also provide videos and articles on a wide range of financial topics, often in response to customers’ emails and enquiries that they give us.
With our online reports we also give our customers a very clear idea of what’s happening with their money, down to the last cent.
Feedback from our customers certainly suggests they appreciate the effort that we take to be clear communicators.
Find out more at www.gmi.co.nz/awards
More resources for financial literacy can be found at www.sorted.org.nz