Think.

  • Sun, 4, Dec, 2016 - 5:00:AM

Hey, Government: stop making finances so hard to understand

Fluctuations in the prime lending rate could lead to disaster in exchange markets while undermining currency robustness and portending a return to NZX doldrums, while also naturally increasing volatility and encouraging investors and angel investors to shy away from commodities as durable goods orders pushes baselines, money market interest and IRAs lower.

Didn’t understand a word of that? Don’t worry – most of us don’t (including the author of this story). So the question is, why does the Treasury – the part of our Government that handles money – make it so bloody difficult to understand financial reports?

The truth of the matter is, the vast majority of us are not what could be considered “financially literate.” Sure, we know how much money is in our bank accounts (usually), but do we understand things like investments, interest rates, taxes, or even know what our credit scores are? Chances are, probably not.

There’s a lot of blame to go around. Some of it is on us, sure, but the Government could also make it easier to understand reports. Schools could also teach financial literacy as part of their curriculum – allowing us to actually understand what is happening with our money. For example: we store our money in banks, but how do banks make money, or at least enough to have branches all over the country (and world), boast fancy corporate headquarters in the most expensive CBDs, and spend millions of dollars each year on advertising campaigns?

The answer usually goes like this: Something something interest, something something loans, something something gobbledygook.

Even people who work with finances every day see it as a problem. “There’s a lot of complexity around finances,” says Credit Simple CEO David Scognamiglio. “There’s no one in New Zealand explaining it simply and easily to Kiwis.”

If we don’t know what our money does or how it works, then how are we to be able to fully participate as members of society? How are we able to make informed decisions about things that affect us? News flash: we can’t.

While the Government could do more to help us understand finances, Scognamiglio says there’s plenty we can also do ourselves. “People need to know their own data,” he says. “That’s a good starting point. Know your credit score.”

Technology such as apps can also be of assistance, he says. “Apps can be a tremendous help. I think we’ll see positive steps around financial literacy [with apps]. I think we’ll see it expand over the next five years.”

There are certainly plenty of apps to help us out with our personal finances. There’s YNAB (“You Need A Budget”), Spendee, Unsplurge – among many others – but they all have the same problem: they don’t help us understand financial terms or financial reports. In other words, they don’t tell us anything about what the bigger picture means. In an increasingly data-driven world, it’s a serious issue.

Perhaps the need for financial knowledge means there’s room for someone to step in and help teach us. Here in Aotearoa we have people like Dr Michelle Dickinson (more popularly known as Nanogirl) explaining science concepts. Could someone do the same for money?

Or could Treasury put some thought into the way in which it communicates with the population it’s tasked to serve? If Treasury actually spoke to us in ways we could understand – rather than bamboozling us with all sorts of technical jargon – we could make our own judgments about state of the New Zealand economy. If we actually understood what the Treasury reports were trying to tell us, we’d be able to call politicians out when they try to use figures to put their own spin on things.

Here’s my challenge to the Treasury: make your financial reports easier to understand by not just listing figures and complicated terms, but actually telling us what they mean – and what they mean to each and every one of us.

To journalists, especially financial and business journalists: help us to understand what such reports mean by taking into account the majority of your readers do not have an extensive economics background and would prefer to get their news without having to have a dictionary nearby.

And to the rest of us: let’s brush up as much as we can on finances – because with education comes knowledge, and with knowledge we can better understand the general state of our economy, and things like the wage gap and the pink tax (the fact that “female” versions of the same thing men use – such as deodorant, shirts, dry cleaning, life insurance etc. – usually cost more than the “male versions” is ridiculous).

Knowledge, as they say, is power. If we can understand the financial foundations of discrimination and oppression, we may just find that we have the power to try to change them.

TAGGED IN

  • Money /
  • finances /
  • Government. Treasury /
  • pink tax /
  • Credit Simple /
  • Dr Michelle Dickinson /
  • Nanogirl /
  • David Scognamiglio /
  • YNAB /
  • Spendee /
  • Unsplurge /
  • NZX /

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Ben
Mack

Associate Editor All Articles