Survey reveals Gen Z confusion about credit
16 August 2017
A nationwide survey of 1100 high school students in Australia has found most of them are confused about using credit cards.
The survey conducted by Suncorp and the Financial Basics Foundation found 85 per cent of students believed they could use credit wisely but, in reality, had little understanding about credit and paying interest.
The Foundation’s CEO Katrina Birch said today’s tap-and-go world of invisible money created an enormous temptation to spend.
“It’s never been more important to teach young people how to earn, save, spend and invest money wisely,” Ms Birch said.
“Living in a cashless society means there are few barriers to spending. Although the students we surveyed were under 18 and would not have a credit card, many would buy games on their devices or use a mobile phone without fully understanding how they’re paid for.”
The survey found almost one-in-five students incorrectly thought it would take about a year to pay off a $2000 credit card with an 18 per cent interest rate by contributing the minimum required.
Only 13 per cent answered correctly that it would take over 15 years to pay off the debt this way.
Ms Birch said when asked about the interest paid over this period, 55 per cent thought it would be less than $500.
“Imagine their horror when they found out it was more than seven times that amount,” she said.
“It’s imperative that we teach young people the skills to stay out of financial trouble.”
Suncorp Banking & Wealth Chief Executive Officer, David Carter, said that understanding money and personal finance empowers young people to make good decisions.
“Financial literacy is about helping young people build confidence with money and adopt good behaviours early, which is something Suncorp is very passionate about.”
The survey results were released to coincide with the Suncorp ESSI Money Challenge 2017, a free online competition run by the Financial Basics Foundation.
Ms Birch said more than 34,000 high school students had participated in the Challenge since it began seven years ago and it was gaining popularity.
“The online challenge uses virtual reality to simulate a six-month period where the students can safely put their money management skills to the test, competing against classmates and students around Australia,” she said.
“They experience what it’s like to have a job, earn a wage, pay tax, get a credit card, invest in shares and possibly, even go bankrupt.
“The simulation gives them an understanding of the consequences of making good or bad financial decisions.”
Mr Carter said the ESSI Money Challenge is a fun way to engage young people and introduce them to real life financial scenarios.
“The game is also a great conversation starter for parents to be able to talk with their teens about money and finances,” Mr Carter said.
“Everybody has a relationship with money and understanding it is a crucial life skill.
“We’re proud to share our longstanding commitment to supporting the financial wellbeing of young Australians with the Financial Basics Foundation.”