For the last sixteen years I have been teaching a financial planning module to the year 10 students at Mount Albert entitled Money $kills.
Using the ‘Bank of Mum and/ Dad’ was not an option; the students had to determine what sources of income were available to them. Ideas for work came quickly: lawn mowing, stocking supermarket shelves, gardening, car washing, window washing, lawn keeping and dog walking; but the best source was the work they could now do as 14-year-olds, but not as 13-year-olds, namely, babysitting at $10-$15/hour.
In order to save $1,000 per annum ($20/week) a student would need to earn at least $30 - $40/week so that they could both spend $10 - $20/week and save $20/week. Assuming an hourly rate of $10/hour, four hours of work (i.e. one night’s babysitting) would produce the required $40.
The same students, when asked what their three-year goal was, were almost unanimous: a motor vehicle for independence and convenience. This is probably not what the cycling and public transport lobby would want to hear! Assuming this motor vehicle has a purchase price of $3,000, the plan above would produce the required sum at the end of three years; and by continuing to work in paid employment there would be sufficient weekly to cover the running costs of petrol, oil, registration, warrant of fitness, insurance and maintenance. If a student wanted to spend more than $3,000 on their first motor vehicle, more paid work would be required to generate the necessary weekly savings.
The weekly savings would be directed into an interest-bearing bank account rather than other investment alternatives due to the need for liquidity and certainty.
I also talked about the benefits of KiwiSaver, once they left school, as a means of funding home ownership and, later, retirement. The role of education was also stressed, in that it provided the platform to create economic choice and financial freedom through increasing the chances available to earn higher income.
This year the Ministry of Education has announced the introduction of a new NCEA course at levels one and two around financial literacy. I hope this course will be mandatory to ensure all school leavers are well equipped and prepared to ensure their future financial investments.
OnePlan, T: 0800 1plan4u, www.oneplan.co.nz
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