By Amanda Morrall
Non-profit financial literacy group Workbase says banks and other financial services sector players are not doing enough to improve outcomes for average New Zealanders, more than a third of whom lack the skills necessary to manage their personal finances successfully.
CEO Katherine Percy says whilst banks have thrown their support behind financial literacy initiatives, few, if any, have taken any concrete measurable steps to make sophisticated banking concepts and constructs fairly understood by the end user.
"I think there is virtually no financial institutions who aren't supporting financial literacy skills but we see almost none focusing on improving skills. There's quite a significant focus on improving knowledge and understanding of financial products and services but we know people need skills in order to engage with those products and services and skills to build the knowledge in order to make financial choices that are appropriate.''
Percy said the complexity and volume of products available on the market today required literacy and numeracy skills that many consumers simply did not have.
"Quite often every day services are riddled with financial jargon and there are so many options and qualifiers that the average person struggles to pick their way through and choose what's best.
By some estimates, half the adult population of New Zealand is lacking in numeracy and/or literacy skills.
"Although most can read, write and use numbers, many lack the skills to understand unfamiliar and technical information contained in banking and insurance documentation and product brochures.
To address the skill gap, Percy said financial institutions needed to: Improve financial literacy skills rather than simply focusing on increasing their knowledge; Identify and remove the literacy barriers that complicated services and systems place on individuals; Place a stronger emphasis on supporting and building customer's financial literacy skills.
Percy said financial sector organisations had an opportunity to "lead the market" by reviewing and improving their own systems, processes and all aspects of customer communication.
"I think there's a lot of benefit for the financial institute that takes the lead here. There is scope to differentiate in the market place as really caring about your customers' understanding. When you are talking about 30% of customers, it's not a small minority. We would all benefit from being able to more easily follow and choose information about financial services.''
To that end, Workbase has come up with a list of five questions that it believes behooves banks to ask of themselves.
1) How confident are you that most of your customers understand the differences between your various accounts or investment funds?
2) Are you as confident that customers with English as a second language and those with low literacy and numeracy understand frequently used terms such as: 'manual transactions', ' contribution holiday' and 'duty of disclosure'?
3) How easy do your brochures and website make it for customers to find out what happens if there is not enough money in their account to cover an automatic payment, or what happens if they are late in making a payment to you?
4) How confident are you that every customer will get a clear, simple and consistent explanation to the above questions from your staff?
5) How confident are you that your staff know how to ask questions to check customer understanding beyond "Do you understand?'
On the flip side of the equation, Workbase came up with the following five questions customers could ask of their banks when doing something as simple as opening a bank account:
1) Is there an account minimum?
2) What are all the fees that apply to this account?
3) Is there a fee for using ATM machines?
4) What happens if there is not enough money in my account to cover the payments?
5) What's in the fine print that I need to know?
(See also interest.co.nz's bank account fees section here).
3 Comments
People need to be taught far more about money itself rather than what products and services banks have been dreaming up lately.
For example, most people you talk with have either no idea where money comes from / how it is created or they think that the government creates new money. Hardly anyone seems to know that virtually our entire money supply is created by private foreign owned banks by way of bank credit. People don't understand that all money is created as a debt and if everyone paid off their debts it wouldn't be good, rather it would mean there was no money.
Most people are not taught that banks want them to only pay the monthly minimum amount owed on their credit card balance because if they only pay the monthly minimum they will end up forever paying off interest and still owe the initial amount of outstanding credit.
Most people think that when they get a mortgage from a bank the bank is actually 'loaning' them the amount of the mortgage. They don't understand that the money doesn't exist until they sign the promise to pay and that they themselves are actually creating that new 'money' by way of their signature. The bank never had the money to 'lend' to start with, they conjur it up out of thin air with a click of a mouse and then charge outrageous interest so at the end of the contract they end up with either twice the initial amount through your hard labour to pay off the full amount plus interest; or you default and they end up with the property plus whatever interest you've already paid. They risked nothing and brought nothing to the table.
Most people aren't taught about fractional reserve banking and still think that when a bank 'loans' money, they are loaning out other people's deposits, rather than creating new money out of thin air every time someone takes out a 'loan'
People should be taught that when you lend someone your own money, your assets go down by the amount that the borrower’s assets go up. But when a bank lends you money, its assets go up. Its liabilities also go up, since its deposits are counted as liabilities; but the money isn’t really there. It is simply a liability – something that is owed back to the depositor. The bank turns your promise to pay into an asset and a liability at the same
time, balancing its books without actually transferring any pre-existing money to you. In other words the bank collects usurous amounts of interest whilst having put no consideration into the contract.
It's all very well being taught what fees are payable, what's in the fine print, etc. But it is more important that people are taught more about money and the banking system itself, so they can finally see how we are being scammed.
I agree totally. The point of education really should be, in our political system of government, who controls the amount of money in the national money supply.
In my opinion it does not make any sense in a democracy to have a politically unaccountable institution have any part in this. It makes about as much sense of the monetary system as not having counterfeiting laws.
“I am afraid that ordinary citizens will not like to be told that the banks can, and do, create and destroy money; and they who control the credit of the nation direct the policy of governments and hold in the hollow of their hands the destiny of the people.” – R. McKenna, Chairman, Midland Bank London
“I have unwittingly ruined my country. A great industrial nation is controlled by it’s system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world… no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men.” – Woodrow Wilson
“Some people think the Federal Reserve Banks are the United States government’s institutions. They are not government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign swindlers.” – Congressional Record 12595-12603 June 10, 1932
You will never hear any journo in our lap dog, system owned, sycophantic media ever ask who controls NZ money supply - What was that famou quote again - Oh yeah - "Give me control of a nations money supply, and I care not who makes it’s laws " - Who made it ?
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