When values change, the value changes

When values change, the value changes

Mr Trent Driver, Dean of Academic Development

I am putting the finishing touches to this piece of writing on Tuesday 18 September, knowing that in several days’ time on Friday 21 September 2012 things, for a great many people, will never be the same again.  Ever again, apparently, if one is to believe the media hype. This Friday, the iPhone 5 goes on sale in Australia – it will be faster, lighter, shinier and contain a different digit than the previous edition which, on Friday, will be obsolete. It will be so significant that thousands of people will queue overnight outside Apple stores all around the country to be among the first to call it their own.

But buying an iPhone is not like buying a book or a beanbag or a packet of chips. From the purchase price, through to the details of a contract with a telecommunications company, through to the fee structures for data usage, there are layers of financial complexity that are easily dulled by a phone’s shininess and thinness quotient. It is easy for that detail to be drowned by the marketing message that today’s consumers want to hear.

It seems that in addition to reading and writing, preparing girls to meet the challenges of the twenty-first century requires them to acquire a broadening range of literacies. As society has moved to give individuals greater responsibilities in maintaining their own financial wellbeing, the need to interpret, evaluate and act on complex information is increasingly becoming a priority. Often referred to as financial literacy, it emphasises the importance of the ability to make informed judgements and effective decisions regarding the use of money in all its contexts and forms. It emphasises not only the knowledge of financial matters but our attitude, behaviours and values that guide the choices we make.

The ability of young people in Australia to negotiate the complexities of financial and commercial issues can make sobering reading. Studies from both the US and Australia point to the decline in financial literacy across the past decade. The last comprehensive survey of these skills among Australian students highlighted that less than half were able to interpret a bank statement, less than a third were able to check a pay slip for its accuracy.  Less than a quarter were able to identify the risks across a range of different investment decisions. More than ninety per cent were able to calculate the costs of car ownership (even though fewer than ten per cent were old enough to drive), while only sixty per cent of Australian students could interpret mobile phone plans and even less could calculate call and messaging costs (Commonwealth Bank).  A 2011 survey of Year 11 and 12 Brisbane Girls Grammar Economics students brought much of this into sharp focus – all the girls surveyed had a mobile phone. More than seventy per cent did not know how the call and data costs for their phone were calculated, and more than half were not aware of the spending they incurred over time.

A solution to this should be easily found. Classical economics assumes that we are all rational individuals and ultimately are guided by our own self-interest. In other words, we will always seek to maximise our returns, minimise any costs we may incur. If we are to be rational we will seek to make decisions on the best available information and so will go out of our way to find it, weigh it up and use it to our advantage. We use our numeracy skills to assess the costs and benefits of transactions with which we are confronted to calculate the best option. And so it should follow that teaching our children more about the commercial world in which they live should make them more financially literate.

However, we increasingly cannot assume that just having access to the right information will breed good financial decisions. Behavioural economists pose a dilemma for educators and families by arguing that our approaches to money are driven more by instinctive actions than by our rationality.  Research conducted by Citi Australia (2010) indicated that many of our financial choices are the consequence of habit and our observations of other people’s behaviour, even when we possess information to the contrary. We will be guided by our expectations of our self and how we would like to appear to others; we are encouraged by the approval of those who we believe share our values and beliefs. In making financial decisions where the impact has a direct effect on our individual material wellbeing, the preferred solution is less frequently the responsible one. This undermines the orthodoxy that information is power, and that learning financial literacy comes from learning more about the commercial world.

However, behavioural economics does illuminate the disconnect between how we engage with money and how it shapes our values and habits. The values that underpinned my financial education were grounded in very different experiences from those of the girls today. Growing up in the 1980s, money was tangible and was literally, not just psychologically, treasured. My pay packets were just that, envelopes I collected every Wednesday afternoon with an assortment of notes and coins inside. There was a sense of physical exchange when I went shopping. Having to hand over the contents of my wallet helped form my sense of worth of what I was receiving. Saving was even a kinaesthetic event, pushing my accumulated notes across a counter into a teller’s hands in return for a stamp in my passbook. The habits I formed and the values they bred were a function of how I spent and saved.

The reality is that financial education has been unable to keep pace with financial innovation. Where my values were formed by making decisions about paper bundles in my hands, today they are made by manipulating numbers on a screen. Money has moved from being tangible to virtual. The way that I learned about money was through my interactions with it, and if our girls are interacting in a different way it stands to reason that their lessons will be different. This redefines, in many ways, how we conceptualise responsibility and prioritise impacts across any manner of transactions. In other words, our relationships with money have changed.  But has what we need to teach students about those relationships changed?

Paul Clitheroe, the chair of the Australian Financial Literacy Foundation, notes that irrespective of advances we might make in advancing our knowledge of finance, the growth in the complexity of the financial environment in which we live will outgrow it significantly (Clitheroe 2006). It’s what Fear (2008) refers to as the ‘financialisation of daily life’.  Students carry one of the most sophisticated financial instruments in their hands every day in the form of their smart phones. As their applications evolve, smart phones will become increasingly diverse tools, directly allowing their users to manage money but indirectly shaping the way they financially interact with the world. The emerging ability to use a smart phone to authorise payments in shops further changes the relationships that teenagers have with a purchase. It disconnects them further from the pecuniary impact of a transaction, they are not required to offer anything, not even a PIN, to receive something in return.

Being able to navigate these complexities is less about understanding how they work but more about having a values-framework with which to evaluate the consequences of decisions, and having the skills to find out what you need to know to make the best decisions. In this sense, developing financial literacy is in many respects transdisciplinary. While many of its principles are embedded in the formal curriculum, the challenge is not the knowledge of commercial concepts but the ability to apply them in varying contexts. On one level at Brisbane Girls Grammar School, the Enterprise and Management programme in Year 10 embeds financial decision making in real-life contexts, modelling problem solving around a range of consumer issues. It focuses on building the skills and confidence to negotiate and communicate solutions to commercial problems by drawing on the research, numeracy, communication and analytical skills the girls bring from their broader studies.

But how do we work to instil the values that allow girls to take advantage of this?  Behavioural economists would question the effectiveness of the stick. Focussing on the negative outcomes of poor decision making can fuel the motivation to disengage from taking active interest in financial issues. It can reinforce complexity, under-confidence, or the reliance on others rather than empowering teenagers to take action and responsibility.

The alternative is normalising the way in which we engage our girls in financial decision making. In many environments, decisions involving money are made behind closed doors and those outside do not receive an insight into the often lengthy and complex process that leads to a solution. All they see is the outcome whether it is the choice of a broadband provider, an upgraded mobile phone plan, or a decision to buy property. Their real learning, their building of their capacity to become increasingly literate, is their ability to understand how the end point was reached.

Richard Gruner (2012) notes that for those people who have lined up to get their hands on the new iPhone first ‘what’s at stake here might be nothing less than (their) happiness’.  As long as that is well-informed happiness based on the best information available, I will be happy.




ANZ (2011), Adult Financial literacy in Australia, ANZ Social Research Centre

Clitheroe, P (2006), Raising the bar in financial literacy, Finsia, Vol 120 No 4

Citi Australia (2010), Evidence versus emotion: How do we really make financial decisions?, The Australia Institute, Canberra

Commonwealth Bank, (n.d.),  Australian Financial Literacy Assessment Report, Retrieved 18 August from http://www.commbank.com.au/about-us/in-the-community/understanding-money/commonwealth-bank-foundation/financial-literacy-teaching-resources/afla.aspx

Fear, J (2008), Choice Overload: Australians coping with financial decisions, Discussion Paper 99, Australia Institute, Canberra.

Gruner, R (2012, September 14), We’re slaves to new products but no closer to happiness, The Sydney Morning Herald, Retrieved 1 Septemeber 2012 from http://www.smh.com.au/opinion/society-and-culture/were-slaves-to-new-products-but-no-closer-to-happiness-20120913-25v0i.html#ixzz26lfVQwbg

Wagland, S and Taylor S (2009) When it comes to financial literacy is gender really an issue?, The Australasian Accounting Business & Finance Journal, Vol. 3, No.1.

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