Ariel Investments, the Chicago-based global manager, has teamed with its Australian marketing and communications partner, Honner, to make a submission to ASIC’s ‘National Financial Literacy Strategy Consultation’. Mellody Hobson, Ariel’s president, has been campaigning on the subject for years, even developing an Ariel-funded curriculum and sponsored schools in the US.
The submission recommends that banks and fund managers give primary school classes money to invest in the share market as part of a new financial education program.
Ariel and Honner submit that ASIC should expand its national strategy to focus more on educating young children about investment, including teaching them about financial markets as early as first grade.
They also say that more real-time and real-world experiences should be incorporated into the curriculum to ensure schools represent a place where financial literacy is practiced and not just learned.
Financial literacy has taken on a new importance in Australia in recent years given the debate over rising house prices and the resulting impact on families with children approaching adulthood. The pressure to buy a residential property is being felt by parents and their children alike.
Ariel sponsors a financial literacy program at the Ariel Community Academy (ACA), an elementary school on Chicago’s South Side, where 98 per cent of students are African-American and more than three quarters qualify for subsidised lunches, reflecting their families’ lower household incomes.
Through a partnership with Nuveen, the investment manager of TIAA, Ariel also awards each class a US$20,000 grant to invest in the US stock market over the coming eight years until they graduate.
The submission says: “Around a fifth of 15-year-olds in Australia don’t have even a basic level of financial literacy that would allow them to recognise the value of a budget or interpret prominent features of everyday financial documents, according to the OECD. Only 15 per cent have a high level of proficiency, which would allow them to analyse complex financial products or solve non-routine financial problems – and Australia is going backwards in this area, with the proportion of financially literate teenagers slipping in recent years.”
Students from a low socio-economic background or from Aboriginal communities on average perform much lower in financial literacy assessments than children from more well-off backgrounds, highlighting the need for better programs aimed at disadvantaged students.
The Ariel-Honner submission recommends authorities in Australia at a minimum develop a national framework for local banks, fund managers and other financial companies to partner with the country’s most disadvantaged public primary schools, similar to the way Ariel supports ACA.
Mellody Hobson says: “If a national framework was established to target younger children in need, we believe many generous people across the financial sector would be willing to give time and money to support the program. And we know, from Ariel’s small pilot in Chicago, that change is possible.”
Honner and Ariel have worked together for the past two years as Ariel has introduced its global equity capability to the Australian market.
Philippa Honner, her firm’s chair, said: “A lot of money has been spent in an effort to improve financial literacy in Australia, both at the personal finance level and within super. We know these challenges are hard to overcome and Australia’s experience is not unique. This submission simply looks to highlight another approach.
“We believe Australian firms could emulate Ariel’s pioneering approach, working collaboratively with Government and educators to introduce financial literacy concepts at an earlier age, targeting children most in need, and ultimately helping move the dial on financial literacy in Australia.”