Carte Blanche

Fighting financial ignorance

Old Mutual and education minister step into deep water.

EDUCATION Minister Naledi Pandor yesterday welcomed Old Mutual's On the Money programme to educate South Africans about matters financial.

One wonders whether she or Old Mutual were fully conscious of the importance of the issue.

Just to conceptualise the creative programme and to produce 1 500 interactive game kits that will go to schools has already cost Old Mutual R8m.

Ms Pandor reminded her listeners yesterday that there are 12m pupils in 26 000 government schools, so this is just a drop in the ocean. She would like more money from Old Mutual and other companies to extend the benefit to more pupils.

My own feeling is that the corporates pay enough tax and the education budget is big enough to devote up to a billion rand to something so valuable.

Most schools hardly touch on economics and finance, so that it is possible to emerge a doctor or an engineer without a smattering of the subject. Most the millions who do or do not matriculate are in complete darkness, yet here they are running little businesses, of which 90% fail at terrible cost.

This very week the Economist devotes three pages to the matter of fighting financial ignorance, which lay behind the sub-prime crisis. The link between lack of knowledge and unwise behaviour is so compelling that President Bush has established a new President's Council on Financial Literacy.

John Bryant will run it. He has run Operation Hope to counter financial illiteracy since the Los Angeles riots of 1992. Also on the president's council are Charles Schwab, the famous US stock broker, and the co-author of Rich Dad Poor Dad. This month has been declared Financial Literacy Month by the US Congress.

The Economist further reports that goverments from Britain to Russia are getting involved. The World Savings Bank Institute is to hold a summit on the question in Brussels. In March a conference in Amsterdam decided to promote financial literacy in the developing world based on a cartoon character Aflatoun.

The Economist quotes Niall Ferguson of Harvard: "It is a well established fact that a substantial portion of the general public in the English speaking world is ignorant of finance."

Four in 10 American credit card holders do not pay the full amount due every month despite the punitive interest rates on such cards. In the UK, 9m people are "financially phobic" and shy away from anything to do with financial information, even their own bank statements.

A quarter of UK pension members did not know their savings are invested in the stock market. If that is true in developed countries, it is doubly true in SA.

Old Mutual's On the Money programme appears to be just what the Economist ordered. The Economist headline: "Getting it right on the money", from Old Mutual's perspective, is ,coincidentally, right on the money.

Advised by creative co-ordinator Harry Dugmore, co-creator of Madam & Eve, On the Money consists of a work book and several games with dice. The workbook will be backed up by print, radio and TV.

Creatively, the programme is built around the Big Five animals of Africa. The lion, for instance, eats first (so pay yourself first by putting something away). The leopard finds a high vantage point....so have clear goals to avoid financial chaos. The elephant's memory is legendary. Ours is not, so we should keep records. The rhino eliminates threats such as debt. The buffalo judiciously grows its herd slowly and steadily. (Wealth building is a lifelong process. Avoid get-rich-quick offers!) And so on.

Ms Pandor said she had spent Sunday afternoon playing some of the interactive games that make up the programme. She said it was "learning in a fun way". That, she said, was a relief "because so much education can be dismal". (Can't help liking this minister of education.)

The Economist article makes the point that good financial behaviour is an acquired habit rather than just knowledge. Indeed, people with knowledge can do unbelievably stupid things - ask the car repossession guys! So it's best to start young and On the Money does just that.

The Mutual programme is aimed at children in primary schools. I question, however, that small kids can understand things like a salary, debt and a household budget. The work book appears more applicable to adults. I suppose many kids will take this material home and educate their parents incidentally.

Old Mutual knows that it cannot afford to make millions of these expensive kits, so it has invited any company to get involved. It would even make the kits available to arch rivals in finance. Unfortunately it is hard to see Big Blue being prepared to distribute items that are so heavily branded Big Green. In the interests of the country, we need to get around such territorial jealousy.

As Pandor said: "This is not a destination but the beginning of a journey."

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