Post to Facebook on 12/11/2018 at 5:00 PM
Commenting on “RBA and ASIC call for enhanced financial literacy for young Australian”
https://www.domain.com.au/money-markets/rba-and-asic-call-for-enhanced-financial-literacy-for-young-australians-790902/
What is financial literacy and how much does one need to understand in order to be literate financially?
Financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources.
In order to make informed and effective decisions, we need information and tools.
There are so much relevant and irrelevant financial information available in various form of media, and from seminars delivered by many self proclaimed gurus or expertS. It is difficult to differentiate between the genuine and the fake. If not careful, the hard-earned money will go down the drain or scammed by the unscrupulous scum.
Investing in real estate is similar to other investments in that it carries risks. It is difficult to eliminate all the risks, but one must try to minimise as much risks as possible. The main tools for helping one to make calculated risk is mathematics.
Many people do not understand the subject, and essentially invest their money by throwing a dart at the dart board and hope that everything will turn out fine.
Let's see whether you can answer the following questions:
What are simple, compound and nominal interest rates?
Why is it important to save at an early age?
What is the financial benefit in renting versus buying?
How long should you take to pay off their mortgage?
Should one buys an investment property before paying off the mortgage of their primary residence?
Should one take advantage of negative gearing?
What is the break-even price range for investment property used for renting?
Why is the meaning of buy within your budget or means?
What is a supply and demand curve?
What is a consumer confidence index?
Should one invest on real estate when the index is low?
What are the pros and cons in investing in overseas real estate?
Young Australians learn a lot of subjects since primary school days. Do they apply or practise what they have learnt? Does it make any difference if they are taught finance?
I taught business mathematics in foundation year for several years. It covered simple interest rate, compound interest rate, mortgage, loan repayment, depreciation, indexes, currencies, present value, break-even analysis, etc.
I also taught Advanced Diploma students Excel in preparing spreadsheets for master budget which include application of financial accounting and management accounting, decision to buy or lease, loan repayment, etc.
For two semesters, I taught Diploma students economics - supply and demand curve, trends, entrance to market, tariff, trade debit and surplus, etc.
These subjects were delivered to students at different “competency” levels. Many of them did not have thorough understanding of the subjects, and even if they did, it was likely that they would forget them after their graduation.
Unless these students found employment which required the use of such mathematics and analyses, the knowledge they acquired is likely to be buried six-foot under.
These subjects are very dry subjects, and when students do not perceive them as potentially useful, they only absorb and retain the knowledge very superficially and temporarily.
Young people do know and understand about drug and substance abuse, effect of drink driving, healthy life-style and eating, environmental pollution, climate change, etc. Why are so many still thinking that these are someone else's problems, and will not happen to them?
It is more meaningful to introduce financial literacy subjects early in the school years, a small dose at a time, and packaged in such a manner the students can digest.
In later years of schooling, these subjects may be offered as short courses, or electives for those who intend to pursue real estate investment.
I hope you understand why not only information that you need, but also have a good understanding of mathematics to help in your decision making.
Thank you for your reading.
Commenting on “RBA and ASIC call for enhanced financial literacy for young Australian”
https://www.domain.com.au/money-markets/rba-and-asic-call-for-enhanced-financial-literacy-for-young-australians-790902/
What is financial literacy and how much does one need to understand in order to be literate financially?
Financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources.
In order to make informed and effective decisions, we need information and tools.
There are so much relevant and irrelevant financial information available in various form of media, and from seminars delivered by many self proclaimed gurus or expertS. It is difficult to differentiate between the genuine and the fake. If not careful, the hard-earned money will go down the drain or scammed by the unscrupulous scum.
Investing in real estate is similar to other investments in that it carries risks. It is difficult to eliminate all the risks, but one must try to minimise as much risks as possible. The main tools for helping one to make calculated risk is mathematics.
Many people do not understand the subject, and essentially invest their money by throwing a dart at the dart board and hope that everything will turn out fine.
Let's see whether you can answer the following questions:
What are simple, compound and nominal interest rates?
Why is it important to save at an early age?
What is the financial benefit in renting versus buying?
How long should you take to pay off their mortgage?
Should one buys an investment property before paying off the mortgage of their primary residence?
Should one take advantage of negative gearing?
What is the break-even price range for investment property used for renting?
Why is the meaning of buy within your budget or means?
What is a supply and demand curve?
What is a consumer confidence index?
Should one invest on real estate when the index is low?
What are the pros and cons in investing in overseas real estate?
Young Australians learn a lot of subjects since primary school days. Do they apply or practise what they have learnt? Does it make any difference if they are taught finance?
I taught business mathematics in foundation year for several years. It covered simple interest rate, compound interest rate, mortgage, loan repayment, depreciation, indexes, currencies, present value, break-even analysis, etc.
I also taught Advanced Diploma students Excel in preparing spreadsheets for master budget which include application of financial accounting and management accounting, decision to buy or lease, loan repayment, etc.
For two semesters, I taught Diploma students economics - supply and demand curve, trends, entrance to market, tariff, trade debit and surplus, etc.
These subjects were delivered to students at different “competency” levels. Many of them did not have thorough understanding of the subjects, and even if they did, it was likely that they would forget them after their graduation.
Unless these students found employment which required the use of such mathematics and analyses, the knowledge they acquired is likely to be buried six-foot under.
These subjects are very dry subjects, and when students do not perceive them as potentially useful, they only absorb and retain the knowledge very superficially and temporarily.
Young people do know and understand about drug and substance abuse, effect of drink driving, healthy life-style and eating, environmental pollution, climate change, etc. Why are so many still thinking that these are someone else's problems, and will not happen to them?
It is more meaningful to introduce financial literacy subjects early in the school years, a small dose at a time, and packaged in such a manner the students can digest.
In later years of schooling, these subjects may be offered as short courses, or electives for those who intend to pursue real estate investment.
I hope you understand why not only information that you need, but also have a good understanding of mathematics to help in your decision making.
Thank you for your reading.
