Financial literacy rates are plummeting among the younger generations and the ability to budget or live within our means has given rise to living on credit and payday loans. So, what changed? Did the loss of physical for digital currency change the nature of financial transactions or was it responsible for our weakened financial literacy, such that we no longer associate spending with money? In the early 20th Century the physical tangibility of everything was certain – money folded, music did not. However, by the 21st Century, most of this had changed – money, like records and information was becoming digitised, so the need to physically touch these products had become increasingly unnecessary. Sure music, books and currency still existed but the vast majority of their use had become digital – MP3s and streaming services like Spotify and iTunes for music; digital e-Ink and PDFs for books; or global repositories like Google or Wikipedia for information. These changes had a significant impact on the way we interacted with and used music and information. Similarly, money has undergone a long but profound shift. We started with trading items of agreed value like gems or gold, then moved onto fiat currency – paper then EFTPOS cards, digital transactions, online purchases and payWave technologies – and more recently a transition into cryptocurrency, such as Bitcoin or Ethereum. In the era of physical currency, you needed to hand over the agreed upon value in the agreed upon currency at the time of purchase. This changed slightly with EFTPOS where digital currency changed hands at the time of purchase. While EFTPOS was originally reserved for larger transactions, over time this has become the most common form of transaction, to the point where several nations such as Sweden and Denmark are considering the abandonment of all physical currency for a purely digital one. It is easy to believe that throughout these money shifts we simply adjusted the way in which we used it and its technological replacement, but can we? The thing with all digitised products, including money, in any form is you can’t see, touch or interact with it directly. It has shifted from a physical thing to an abstract concept of that thing. Research has already linked credit cards to increased spending, and particularly to the purchase of unnecessary objects by releasing budget constraints, while using cash makes participants more aware of their spending. Is this a universal or generational problem? The Baby Boomers had nothing but physical currency for a large proportion of their lives, Gen X crossed over from physical to digital and now the Millennials have been raised on digital money. Has this affected how each generation understands money, financial risk, or budgeting? A new collaboration between two institutions in the Hunter may help shed some light on the current state of the community’s financial literacy. A five-year partnership between the University of Newcastle and Greater Bank will draw on their combined strengths in education, banking, community engagement and regional focus, to deliver community education programs and practical facilities that support informed financial decision-making when managing money. Within the University’s NeW Space, a dedicated teaching space dubbed the Greater Bank Finance Lab will provide university students with a simulated corporate environment using industry standard financial software. Students will build skills in effective decision-making, economic systems, risk management, monetary markets and financial literacy, before they graduate and venture into the real world. However, this partnership will reach beyond university students as it connects with the next generation of spenders through the Greater Finance Academy. This financial literacy outreach program will be delivered to high schools in the Hunter, Central Coast and Western and Northern NSW regions. The partnership will reach community members through a Finance Clinic, delivering free short courses on financial topics that people of all ages need to consider when managing their money. I am hopeful that the collaboration between the Greater Bank and the University of Newcastle’s Business School will lead to some insights and help us understand what this process is doing to our financial literacy.
SHIFTING VALUE: Pro Vice Chancellor, Faculty of Business and Law, Professor Tony Travaglione, Greater Bank CEO Scott Morgan, and student Robyn Fox, in the new Finance Lab at NeW Space. Photo: Jonathan Carroll
Financial literacy rates are plummeting among the younger generations and the ability to budget or live within our means has given rise to living on credit and payday loans.
So, what changed? Did the loss of physical for digital currency change the nature of financial transactions or was it responsible for our weakened financial literacy, such that we no longer associate spending with money?
In the early 20th Century the physical tangibility of everything was certain – money folded, music did not.
However, by the 21st Century, most of this had changed – money, like records and information was becoming digitised, so the need to physically touch these products had become increasingly unnecessary.
Sure music, books and currency still existed but the vast majority of their use had become digital – MP3s and streaming services like Spotify and iTunes for music; digital e-Ink and PDFs for books; or global repositories like Google or Wikipedia for information.
These changes had a significant impact on the way we interacted with and used music and information.
Similarly, money has undergone a long but profound shift. We started with trading items of agreed value like gems or gold, then moved onto fiat currency – paper then EFTPOS cards, digital transactions, online purchases and payWave technologies – and more recently a transition into cryptocurrency, such as Bitcoin or Ethereum.
In the early 20th Century the physical tangibility of everything was certain – money folded, music did not.
In the era of physical currency, you needed to hand over the agreed upon value in the agreed upon currency at the time of purchase. This changed slightly with EFTPOS where digital currency changed hands at the time of purchase.
While EFTPOS was originally reserved for larger transactions, over time this has become the most common form of transaction, to the point where several nations such as Sweden and Denmark are considering the abandonment of all physical currency for a purely digital one.
It is easy to believe that throughout these money shifts we simply adjusted the way in which we used it and its technological replacement, but can we?
The thing with all digitised products, including money, in any form is you can’t see, touch or interact with it directly. It has shifted from a physical thing to an abstract concept of that thing.
Research has already linked credit cards to increased spending, and particularly to the purchase of unnecessary objects by releasing budget constraints, while using cash makes participants more aware of their spending. Is this a universal or generational problem?
The Baby Boomers had nothing but physical currency for a large proportion of their lives, Gen X crossed over from physical to digital and now the Millennials have been raised on digital money.
Has this affected how each generation understands money, financial risk, or budgeting?
A new collaboration between two institutions in the Hunter may help shed some light on the current state of the community’s financial literacy.
A five-year partnership between the University of Newcastle and Greater Bank will draw on their combined strengths in education, banking, community engagement and regional focus, to deliver community education programs and practical facilities that support informed financial decision-making when managing money.
Within the University’s NeW Space, a dedicated teaching space dubbed the Greater Bank Finance Lab will provide university students with a simulated corporate environment using industry standard financial software.
Students will build skills in effective decision-making, economic systems, risk management, monetary markets and financial literacy, before they graduate and venture into the real world.
However, this partnership will reach beyond university students as it connects with the next generation of spenders through the Greater Finance Academy.
This financial literacy outreach program will be delivered to high schools in the Hunter, Central Coast and Western and Northern NSW regions.
The partnership will reach community members through a Finance Clinic, delivering free short courses on financial topics that people of all ages need to consider when managing their money.
I am hopeful that the collaboration between the Greater Bank and the University of Newcastle’s Business School will lead to some insights and help us understand what this process is doing to our financial literacy.
Dr David Savage is a behavioural economist at the Newcastle Business School, University of Newcastle
