Bank of Ireland head of pensions and investments Bernard Walsh points out the benefits of starting saving and investing early. “The reality is that the earlier you start, the easier the journey is,” he says. “Einstein described the power of compound interest as one of the most powerful forces in the universe. If you look at the case of two individuals investing €5,000 a year and achieving a return of 5 per cent per annum. The one who starts at 25 and saves that amount every year until they retire at 65, they will have built up savings of €639,000. If the other waits until they are 35, they would only have €354,000 when they retire at the same age. The gap is huge.”
That illustrates the importance of regular savings. “The great thing about is that when people get the habit, they tend to stick to it. It may involve a bit of pain at the start but get used to it quite quickly and you don’t notice it after a while. But you have to learn about the benefits first.”
And more is being done to educate people, both young and old, when it comes to their finances. “There are a lot of new programmes taking place in schools and there are lots of online resources available for schools as well.”
Kieran McDonell of the Irish League of Credit Unions agrees with the need for early financial learning. “It’s fair to say it’s never too early to start saving and investing. We even have parents coming into credit unions with newborn babies to open accounts on their behalf. In terms of educating younger people, it depends on their age and level of maturity. It can start when they are four, five or six years of age. Children play shop. They go shopping with their parents, and they start to understand what money is used for and so on.”
Financial skills are life skills and the earlier you learn them the better, he adds. “They are sticky skills, and they tend to stay with you for life once learned. The more exposed to financial education early in people’s lives the better.”
But there is a gap in people’s financial knowledge, as evidenced by recent ILCU research which found an alarming lack of awareness when it comes to credit cards. More than half of Irish consumers own a credit card; however, 66 per cent do not know how much interest they pay. And 61 per cent say they do not understand how credit card interest works.
“People need to understand their relationship with money,” says McDonnell. “Are you a spender or a saver? We are all guilty of making unconscious purchases. But we have to be aware of the fact that we may have to forgo something else when we do it. There are sacrifices and trade-offs. People also need to understand the costs associated with buy-now-pay-later solutions on the market at the moment. They also have to understand the implications of things like personal contract purchase (PCP) agreements for cars.”
These are not necessarily taught in school. “The education system is a bit spotty in this regard,” McDonnell notes. “In primary schools it tends to cut across maths. In secondary it can come into business subjects and there is a lot of it in home economics. But it depends on the subjects the student picks. It shouldn’t depend on that. There is a need for a much wider approach.”
He is not pointing a finger at schools, however. “We have to acknowledge that teachers are already at the pin of their collars in terms of doing their jobs and schools are poorly resourced. It needs to be addressed at the broader curriculum level.”
Credit unions are working with schools to support them in this regard. Start Money Smart is a primary school resource developed by the ILCU and online educational company Twinkl Ireland.
“Aimed at students in primary school, the resource is tailored for each level and explains finance in a fun, easy-to-follow and engaging format,” he explains. “It teaches students how money works with activities that include real-life scenarios, problem solving and storytelling. It also allows them to explore their relationship with money so they can make more informed decisions.”
The Clued-In programme is aimed at second-level students. Designed for delivery by teachers in a classroom setting it explains personal finance in a concise, engaging format. “The resource helps students to explore their relationship with money, the good and bad, and to look at ways that they can make smarter, more informed decisions.”
Bank of Ireland is also supporting second-level schools with financial literacy. “The schools are doing more and more, from what I can see,” says Bernard Walsh. “Our Money Smarts Programme for secondary schools includes content, workshops and events designed to provide students with both financial literacy and key life skills they’ll benefit from for life.”
The programme’s comprehensive suite of financial literacy presentations is aligned to the curriculum and tailored to specific class years from first to sixth to meet the needs of both junior and senior cycle students. Delivered virtually, each presentation fits into a 40-minute class with content covering the six pillars of financial wellbeing; spending and saving; earning and income; credit and debt; investing; risk and protection; and financial decision making. There’s also a very timely presentation and video on fraud.
“We also need to find new ways to engage younger people through the social-media platforms they use like TikTok, Instagram and so on,” Walsh adds.