Personal Finance Should be Part of Core Education

I believe personal finance should be a core subject taught to our children at school. We should teach how to manage and budget money, the concepts of savings and compound interest, and the risks of credit and deferred payment. Finance and money management education should be threaded through each year of schooling. I think it would offer more practical value – and a better return on investment – than some of the traditional subjects taught.

An opinion piece in The Age by Liora Miller, “Is PayPass the enemy of the young?” reflects on some of the risks of tap and go payments, especially for young people.

Australian Tax Office research this year reveals that only one in five Australians still prefer using cash for purchases.

Last week I bought lunch from a sandwich shop. I paid with cash. The look of surprise on the server’s face was clear; to the point where we both made a joke about the rarity of somebody paying with ‘real money’ as opposed to PayPass tap and go. In Australia, tap and go is essentially the default.

Cash use in Australia has fallen by a third in a period of six years.

That’s about how long tap and go transactions have been available, and I would think the next third of cash usage will decline more rapidly than another six years.

When I use tap and go, I take the extra step of entering the transaction into YNAB on my phone. YNAB’s direct bank import features don’t work with Australian banks but I consider that a feature because entering each transaction keeps me connected to my money and my budget. I recognise, however, that I’m an outlier. Most people are not taking a similar extra step – it’s spend and forget.

A cashless society in the near future appears to be an inevitability. We need to focus on ensuring young people understand the implications of deferred payment.

This is the key point of the article, but unfortunately, Miller fails to suggest how this might happen. This brings us back to my initial premise: that we as a society need to get serious about financial literacy.

I am Treasurer and Director of Midlas, a not-for-profit organisation that offers financial counselling as one of its key community support services. The government provides funding support to enable Midlas to offer this service. Yet demand is outpacing supply, and this is a common refrain across all the providers of financial counselling.

As great as it is that government provides financial support to assist organisations such as Midlas help people in financial stress, the policy settings are wrong. Just like medicine, where spending on prevention is cheaper and more effective than spending on a cure, spending on financial education would be more effective and deliver greater good than spending on help after the damage is done. Avoiding financial stress would lessen the prevalence of issues that often stem from financial stress, such as illness and poor mental health, relationship damage, homelessness, and drug and alcohol abuse. Not only would this benefit the individual but it would help broader society who share the negative impact of these societal problems.

Through us, the government needs to get serious about teaching our kids about personal finance and money management. The growth of tap and go is a lead indicator of a problem that may come to bite us in years to come. We should act before personal indebtedness becomes a national plague.

Internet Services Worth Paying For

On the Internet there is a weird user expectation that everything should be free. Over the past couple of years I’ve been bucking this trend and have determined that spending a bit of money on what is both a hobby and an integral part of my existence in our modern, connected world is something I’m willing to throw a bit of money towards.

I don’t want to be the product; I want to be the customer. Paying money for a service to avoid my usage being a vector to sell advertising is a trade-off I am happy to make.

The other nice thing about paying for services is that it facilitates access to genuinely useful customer support. As a paying customer companies tend to care a little more about ensuring satisfaction. Having problems solved by a system administrator instead of wasting my own time futzing about can make a subscription worthwhile. I value my time, and where money can buy time, I’m in.

I thought I’d take a quick audit and look at the areas online where I am willingly paying money in favour of a free option.

Ciao Google

The biggest change was a move away from many Google services. While Google offers its GSuite as a paid option (and a pretty good one at that), I elected to go a different route.

I’ve always preferred native apps and have never loved the Gmail web interface. As a free service it’s fine but if I’m paying real money I don’t want to be spending it on something I don’t enjoy using.

If I were an Android user, the Google situation might be more compelling. On iOS, however, there always seems to be a little friction between what Google wants and what Apple is prepared to give.

So I bid adieu to Google, and took my business elsewhere.

My Paid Providers

  • Mail & Calendars: Fastmail. I evaluated Office 365, GSuite and Zoho when making the choice. I only wanted really good email and calendars; I didn’t need online storage, office applications, and other bolt-on services. I like that Fastmail is an Australian firm and that it has a focus on standards compliance.
  • Domain registration: Zuver. The little brother of VentraIP. It is a great no-frills option, and they were having a product sale when I signed up.
  • Web hosting: VentraIP. Another Australian company that offers great support service. Their servers are fast and I am provided a web hosting solution that is perfect for my needs.
  • Personal finance: YNAB. Our family is in the best financial position of all time thanks largely to YNAB. No arguments about money in our home! The cost of this service is a pittance compared with the value (both monetary and stress relief) it has delivered.
  • Password security: 1Password for Families. The best security is not even knowing your own passwords. I am totally willing to pay to ensure all my online accounts (plus credit card details, etc.) are unique, random and locked down. It’s peace of mind.
  • Entertainment: Netflix and Spotify. I’m hardly a special snowflake here, right? Broadcast media is dead to me.
  • Photo Storage: iCloud 50Gb. Apple has me over a barrel here. Despite maintaining local backups, the ubiquity of photos being available to all my devices is too good not to take up.

Bits and Bobs

I also pay for a few other subscription apps and online services but I don’t consider them to be part of my “infrastructure” so am not going to list them all here.

The Customer is the One Who Pays

Money makes the world go around. It pays employee wages, funds infrastructure acquisition and incentivises the implementation of new ideas. I’d rather be a direct customer paying my own way, and helping companies do good work than rely on the largesse of search and banner advertising to underwrite my online activity.

While I pay the bills, I call the shots. This is true in all business, and online services shouldn’t be seen any differently.

Budgeting and YNAB

I’ve always been a money tracker. I still have ledger books from when I was 14 years old, with my handwriting tracking my money in and out. I would reconcile it to my bank savings account with little ticks.

I think I learned this habit watching my Mom as she would carefully manage the family finances at the kitchen table.1 There was never enough money to go around (not that I was aware of that at the time), so much of my Mom’s job was timing cheque payments, deferring bills, and calculating how much, if any, might be left over for the week. Such was life for a divorced mother of four living on not much more than a pension and without any support from her former husband and father of the aforementioned children.2

As I grew and got my first part-time job, my money-tracking ways continued. Each week I would record my income, and understand how much money I had available to get me through to the next week.

I got a bit older, graduated university and got a real job. By this point I had graduated to electronic money tracking. For a short while I used Microsoft Money, before settling on Quicken and using it for years. Each year, they would release a mediocre upgrade and I would pay the license fee to keep using it. Year after year that software got worse.

I got married and we took a traditional approach to finance by merging our money. What was mine was hers, and what was hers was mine. Fortunately, my money tracking addiction could continue since while my wife is financially aware, she didn’t have a compelling urge to record and reconcile the way I did!

Eventually Quicken became so terrible that I couldn’t bring myself to pay for it anymore. This was a dark time. There was no compelling software to adopt so I rolled my own Excel spreadsheet and used that. This was probably the first time since my ledger books that I wasn’t recording transactions. Instead, I tried to take a high-level approach by using a budgeting/forecasting model. It felt like it was working at the time but in hindsight we fell into a bit of a financial hole without realising it. We were relying on future income to cover past expenditure – what is referred to as ‘riding the credit card float’.

About 3 years ago, I realised that my carefully managed spreadsheet was busy work that was actually not helping us meet our goals. I did another software review and this time I found the application that changed everything: YNAB (short for You Need a Budget). YNAB took me back to my roots. It required transaction monitoring and was backed by a ledger that needed to be reconciled. But the magic trick of YNAB is that first and foremost, it is a budgeting system. As much as I had tracked money for all those years, and generated my income and expenditure reports, it was always backwards looking. I was auditing what had already happened, but not making commitments about what my money should do in the future. YNAB completely changed my perspective on personal finance management.

YNAB is all about giving jobs to the money you have on hand right now. You budget that available cash down to zero, then stop. You don’t live on the credit card float. You don’t plan to spend more than you have. You allocate the money to a series of planned expenditures, and then track progress against that. If you overspend you get immediate feedback and can adjust your budget through reallocation – as YNAB says, you ‘roll with the punches’.

While this seems like short-term budgeting, it actually facilitates long-term goal realisation. You suddenly realise how finite your cash supply is, especially after accounting for those recurring bills and putting money aside for the big annual bills3. With the little amounts that are left over after setting money aside for the necessities, you can make some hard decisions about what you want to do with that discretionary cash.

Since using YNAB we have never been in a more solid financial position. We can pay all our bills as and when they fall due (even the big ones). We can save and invest for our family’s future. We can set aside money for fun.

The best thing of all, though, is that we do not fight about money. We have no nagging money stress between us. We share our income, we share our expenses, and we share our savings goals and spending intentions.

After having managed my money very carefully for almost 30 years, this is the best it’s ever been. I endorse YNAB wholeheartedly. Get it, use it, love it!

  1. This was the pre-computer era, when every task people did was so much more visible.
  2. I will never cease to appreciate how my Mom was able to keep it together under such difficult circumstances.
  3. Think insurance, school fees, council rates. All the ‘oh, crap’ moments!