For as long as we can remember, tiny germs have been infiltrating our primary schools, which can cause serious problems if not treated properly.
And no I’m not talking about lice, or nits…it’s those pesky Dollarmites.
Those little microscopic germs that have been affecting the financial habits of humans from childhood all the way through to home ownership and beyond.
You remember it right? Somewhere between recess and ‘big lunch’, you’re in the classroom, when the teacher introduces nice Mr Bank Manager to the class who reveals the wonders of saving money and putting it in the bank.
You get a passbook, a bank card and all these exciting ways to withdraw and deposit your pocket money, not to mention a themed piggy bank and other cool toys to go with it. And next thing you know, it’s three decades later and you’re a lifelong customer.
Well, not any more
The NSW government has now banned bank-run marketing schemes from classrooms, as they overhaul financial literacy programs. It means NSW has now joined the ranks of the states with existing bans, like Victoria, the ACT and Queensland.
The announcement was followed by the Commonwealth Bank saying it will no longer run the Dollarmite program in schools.
Consumer group CHOICE welcomed the announcement, with CEO Alan Kirkland pointing out that the jury was out on whether kids ever actually benefited from the program in the first place.
“The reality is that Dollarmites was a very effective marketing program, signing up primary school aged-children to a life-long relationship with the Commonwealth Bank. When the corporate regulator, ASIC, reviewed programs like Dollarmites in 2020, it found no evidence of any positive impact on financial literacy. Instead, it found they used sophisticated marketing techniques to target vulnerable consumers,” he said. “In 2017 we uncovered that 46 per cent of people got their first account with Commonwealth Bank and a third of people still had this account as an adult.”
The lazy tax
And there you have it. Forever and a day, banks have realised that most people just stick with the bank that gets to them first… for life.
They figure that if you sign up every kid in Australia, the vast majority of those will stick with them and never bother to take their money elsewhere.
And that’s what some people refer to as the lazy tax. It’s the extra money we pay to banks because we think there’s no point switching…they’re all as bad as each other right?
Loyalty, not literacy
Somehow, way back when, banks were able to give us the impression that if you stayed loyal to them, they would look after you.
You know the story… wherever you lived, your local bank branch had a trustworthy bank manager who knew you and maybe supported your community group or junior sports club, and you could go to that bank manager and say you needed to extend a loan. And he or she would say yes because they knew you and trusted you too.
This perception was easiest for the Commonwealth Bank because it was a public company from its establishment in 1911.
However, it became fully privatised by 1996, so was like any other bank by then, yet was able to hang onto the misguided public belief that it somehow put its own interests behind that of the customer.
Fast forward to today and every loan application goes through a computer algorithm, with no wiggle room for extenuating circumstances. And not only that, but the longer you’ve been a loyal customer, the less likely you are to get a good deal because you’re not deemed a flight risk. In fact, someone who has zero history with a bank is offered a deal way better than a loyal, existing customer, so that they might ditch their current lender and come on board. Face it, the banks taught you loyalty, but it only goes one way.
That’s why it’s important to think only of yourself when you’re making financial decisions because regardless of whatever nostalgia you have for your bank, it’s pretty obvious their ‘algorithm-bot’ doesn’t share your sentiment. They are trying to pull the wool over your eyes so that you think they’re looking after your best interest… in fact, they’re banking on it. It’s part of their business model.
The most important part of real financial literacy is empowering everybody to make the most informed choice and when you break it down, there are a certain number of lenders competing for your business. Let them compete, because at the end of the day, you have the money and the choice is yours. Access our vault of free videos to improve your financial literacy and knowledge in property investment.