10 money lessons we can learn from the less fortunate
Rob Stock is a finance expert from New Zealand. In this piece, he talks about the lessons that have been learned from a course designed from low income earners in west Auckland, and examines how we can apply these sometimes-harsh lessons to our own lives.
The idea that you have a "money personality" is widely pedalled.
I am a saver. I am a spender. I am an impulse buyer.
They are statements that sound like our money natures are immutable.
But they are far from it, a study of the low income people who have completed the ANZ-funded MoneyMinded course in south and west Auckland suggests.
Those who do the course, which is provided by the Solomon Group, have often been sent by Work and Income.
These are people who are getting by on the lowest rung of our economic ladder.
But the before and after behaviours, attitudes and the way people who have done the course, see themselves has been revealed in a study by University of Auckland Business School professor Peter Boxall.
Boxall's report contains lessons for everyone on facing up to their financial failings and the changes to your wealth, health and sense of hope that come with doing so.
Lesson 1: Anyone can change
Boxall's study showed that there were "statistically significant" changes for the better in 92 per cent of the behaviours and attitudes of the people who had done the course in the last couple of years. There were behavioural changes. Just under half of those surveyed said they had paid bills on time before doing MoneyMinded. Afterwards, that jumped to over 80 per cent. There was evidence that core money beliefs had changed as well as behaviours. Before doing the course four in ten people agreed to the statement: "I believe money is there to be spent." After, that dropped to three in ten. If you doubt your ability to change on your own, get yourself trained.
Lesson 2: Changes of behaviour can bring new hope
Boxall found that before doing the MoneyMinded course, just under 30 per cent of people felt the way they managed their finances would have no impact on their future. That's a fairly hopeless view of the world. It speaks of people who feel their income is just too low for financial literacy to make any difference to their long-term hopes. After the course, just 8 per cent still thought that. People have learnt is that money smarts can make a difference, even on tight budgets, though Boxall said those with households incomes of $25,000-$45,000 showed more positive changes in attitude and behaviour compared to those on lower incomes.
Lesson 3: Get a money buddy
One-on-one, you can only learn so much from a financial literacy teacher, but when you do that learning with others, the impact is magnified. When asked if they had learned "a lot" from the other people on the course, 94 per cent said they had. In fact, many participants are still in contact and are there for each to talk money matters over when there's a need.
Lesson 4: Even the poorly-educated can learn money skills
Basic literacy and numeracy are massive challenges to many. Literacy is measured on a scale of 1-5, where levels one and two are people who can't deal with anything but relatively simple printed material. Things like loan contracts and bank terms and conditions are anything but simple.
Lesson 5: Get a rainy day fund
Before doing MoneyMinded, 63 per cent said they were unable to cope with unexpected expenses. That dropped to just 3 per cent afterwards. Just under a third had savings for emergencies before doing the course. Afterwards that rose to eight in 10 people. A lack of savings can result in pressure to take on high-interest debt and is a big source of stress as families are never more than one unexpected bill from disaster.
Lesson 6: Plug the spending leaks
The blight of many financial lives is the "lost opportunity". This is generally the money that could have been saved, or paid off debt that was blown on something essentially pointless, like a habit of buying more clothes than you could reasonably wear in a week, daily energy drinks or coffees bought from cafes. Everybody has "spending leaks", which are things they spend on which don't improve their lives in any substantial way, but reduce their ability to amass savings and clear their debts. To go from being a spender to a saver, a person needs to spend less than they earn. A quarter of those surveyed said they knew before the course how to identify their spending "leaks". That rose to over 90 per cent after.
Lesson 7: Anyone can save
Plugging the leaks led to a big jump in those who identified themselves as "more of a saver than a spender", from 20 per cent to 70 per cent. Most saved around $10 a week. It's not a lot, but the vast majority of people on the course had household incomes of $25,000 or less, so saving anything is a triumph of determination, restraint and skill.
Lesson 8: Learn to say no
Saying no, even when you do not have the money is hard, even if it means taking on debt to stump up the readies. But learning to say no is a skill like any other. Confidence to say no when there was no money to make a contribution jumped from just over 40 per cent of people to just over 70 per cent. Additionally, said course founder Frank Solomon, people who had actual savings felt more empowered to give, while limiting it to an affordable amount.
Lesson 9: Debt and the mobile shopping trucks are big issue
Social Development minister Anne Tolley has come up with a plan to try and limit the damage she believes the mobile shopping trucks are causing. It follows a re-writing of the laws designed to limit the damage caused by loan sharks and other fringe lenders. Mobile shopping trucks are in fact lenders. If you have no cash, you can call them up, and take the goods on tick. There's no money to be paid immediately, but the buyer incurs a debt to be paid back through a series of instalments. The interest rates charged are often high. One in five taking the MoneyMinded course said they had truck debt.
Lesson 10: It's not about the money.
Being good with money is about doing your best for your family. When asked to agree or disagree with the statement "Since doing MoneyMinded, I feel able to better provide for my family" 97 per cent agreed. And 86 per cent reported feeling less stressed about their futures.
Are you good with money? Let us know in the comments.
Written by Rob Stock. First appeared on Stuff.co.nz.