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Start them young… in debt?

Categories : Cash connects people, Cash contributes to education
August 18, 2017
Tags : Asia, e-money, Education, Electronic, Millennials
Handing out smartwatches to school children as a means to teach financial literacy? Not so sure.
Viktoria Dijakovic

There is growing impatience to shift towards cashlessness. Indeed, instead of waiting for the public to voluntarily adopt alternative payment methods, banks and payment technology providers are using increasingly aggressive tactics, as in the recent case with Visa. But where Visa has decided to tackle merchants, Singapore’s POSB bank is trying to gain customers directly from their cradle – or at least not far from it.

Through POSB’s Smart Buddy Programme 6,000 of Singapore’s primary school students from 19 schools were given smartwatches to make their purchases at the school cafeteria. According to POSB, this supposedly generous move is meant to help these future adults to better manage their savings and become financially literate. But the question is: is that true?

In Australia, the not-for-profit Financial Basics Foundation has data that proves the exact opposite. Results from a recent survey, where 1,100 students from various high schools across the country participated, are quite alarming. Despite 85% believing that they have a good understanding of how credit works, their responses to some basic questions were off target. Over 50% are convinced that it takes only three years to pay off a $2,000 credit card debt at an 18% interest rate; in reality, it would take over 15 years! Furthermore, one out of three respondents believes that there is “no interest charged on outstanding balances at the end of the interest-free period” (Kathy McLeish, ABC News). Even Natalie McClatchey, teacher of financial literacy at Mansfield Sate High School in Brisbane says that her own children believe groceries are free when they are paid with tap-and-go.

The risk with the Singaporean model is that contactless payments are not only being encouraged by a bank – who is driven by market expansion and customer acquisition priorities – but that this encouragement is being supported by the public school system. Indeed, POSB has expressed its desire to expand the programme to Singapore’s remaining primary schools in the next couple of years.

The smartwatches that were handed out as freebies, aside from being a payment tool, also offer fitness tracking options. Parents can track their children’s spending habits and supposedly teach them money management through a dedicated smartphone app.

It’s becoming a “buy now, pay later” world with the risk that future generations misunderstand the true value of money and fall into debt at a young age. Just look at Alexandra Holtermann who managed to improve her spending habits and save 32% of her benchmark expenditures thanks to something as simple – and as tangible – as cash