Financial literacy is a vital precursor to using debt in a responsible way.

00;00;00;01 - 00;00;20;18
Karalee Katsambanis
So wanted to have a chat tonight to a friend of the Money News program right across the Nine Radio Network and especially here for Money News on Radio 6PR. We are going to have a chat to Keith John, who is founder and Managing Director of Pioneer Credit, which is an ASX listed purchaser of impaired credit. It is the second largest sector participant.

00;00;20;25 - 00;00;45;04
Karalee Katsambanis
Pioneers invested more than $700 million in what's called impaired credit. Currently, there are more than 250,000 customers, more than quarter of a million that owe them $2 billion. So Keith really is at the coalface of this cost of living crisis in Australia, which, as I said, despite the RBA decision today, continues. Keith, good evening and welcome to the show.

00;00;45;06 - 00;00;47;08
Keith John
Hi, Karalee. Nice to be with you again.

00;00;47;10 - 00;01;00;23
Karalee Katsambanis
Lovely to be with you too. Now that we have spoken previously about, you know, financial literacy, financial stress, I guess my first question this evening is why do people get into financial trouble?

00;01;00;26 - 00;01;22;01
Keith John
Yeah, look, it's a I mean, it's a great question. I think it's one that's often overlooked. And we talk about being in trouble, but the reason is how did we get there? Why did that happen and can we avoid it? I mean is the big one for listeners. But in our experience it actually just comes down to a few simple things.

00;01;22;03 - 00;01;49;13
Keith John
And they are death. Death of relatives or death of loved ones. Divorce, sickness, long term sickness. Domestic violence unfortunately, is on the increase. And now, which is becoming a little bit more of a concern, is losing your job. So in Australia, one of the things that's very good with our financial institutions is they know how much money that you can reasonably afford to borrow when things are going well.

00;01;49;15 - 00;02;01;29
Keith John
But they of course can't predict when things go bad for you with their the things that we're not prepared for enough as a community. And they're the things that get us into trouble as opposed to generally just spending too much money.

00;02;02;01 - 00;02;19;17
Karalee Katsambanis
And you know, a lot of people are so glad that you've covered, you know, how people can get into financial trouble because a lot of people might only think, you know, is it only working class or more lowerly paid people that experience the financial stress? But what I wanted to ask you is I touched on just earlier. Your business clearly exists.

00;02;19;17 - 00;02;46;29
Karalee Katsambanis
Pioneer Credit because of a lack of financial literacy. How can we improve that in Australians and the reason why I'm asking this is you get a lot of people maybe from a traditional European background as well, speaking from experience, where people were taught to always save up, never to use the credit card, etcetera, etcetera, I mean that's decades ago, but it's sort of putting those building blocks in place.

00;02;47;01 - 00;03;06;29
Karalee Katsambanis
But we've got a lot of generations that, you know, we've got the tap and go, we've got the fact that people aren't getting, you know, a pay packet of cash in an envelope, which hasn't happened for many, many years. But we're losing that thing of what the real value of money is. So as I said, how do you see that we can improve this in Australians?

00;03;07;01 - 00;03;34;17
Keith John
Yeah, look, there's a range of things. I mean, I think the first part is that it starts when we're young. You know, Australia has a financial literacy plan and it addresses a whole gamut of areas that we need to work on. But it doesn't talk about schoolchildren, it doesn't talk about primary school. And you'll remember when we were young, Karalee, that we used to go to school and you would, you know, you'd have your Commonwealth Bank Dolomites account, which is which is on the nose now.

00;03;34;17 - 00;03;59;04
Keith John
But that has been canceled. But you'd rock up with your you know, with your the money that you've got on the weekend, your $2 whatever. And you'd watch it grow. And that meant something, right? That meant something because you saw the value, you saw what your money was doing. And we started the conversations very, very young. Those conversations have dropped away.

00;03;59;07 - 00;04;21;13
Keith John
And without them, people just lose sight of what money is, what it involves, how you get it, how you save for it, what it grows into, and the value of things. You know, we live in a world now whereby you can get everything immediately. There is no laybuy anymore. You buy now, pay later and you take it straight away.

00;04;21;16 - 00;04;33;27
Keith John
So we need to get back to having those conversations. Speaking to children about what money is, what it can be, and the dangers of it as well. If you don't look after it.

00;04;34;00 - 00;04;59;28
Karalee Katsambanis
Well, look, it's funny. I was going to say that because we try and keep you know, we try and draw on personal experience. But and it's no one's fault and this is certainly not a whack at Optus or anything like that. But recently with a WAFL grand final, like a lot of the juniors around Western Australia, to go there and do some half time sort of walking around, had a girlfriend who took some kids and of course Optus is a cashless, venue and she bought four waters.

00;04;59;28 - 00;05;22;05
Karalee Katsambanis
They were $6 each, she was expecting that, but she did the tap and go and it was $24 each kid got a bottle of water. But it's funny, my friend is a little bit out there. What she actually did is when she took the kids back to her house, she actually had the cash and she took it. She took four bottles and she said, well, these were $6 each.

00;05;22;08 - 00;05;39;28
Karalee Katsambanis
And of course, a couple of the kids, they had no idea because they just saw her tap the card. And she's very much of that thing that unless kids actually see that cash. Now, of course, you know, she's one of a kind that does that. And it's fantastic. Not everyone's got the time or the ability or to even think of doing it, but it is a bit of a concern.

00;05;39;28 - 00;05;51;00
Karalee Katsambanis
Now, as I said, I've got kids. You've also got a couple of kids. They've recently left school. How did you approach financial literacy with them? Please keep their names out of it and their ages as well.

00;05;51;03 - 00;06;13;20
Keith John
Of course. So yes, they both left school. You know, for our family it is very much about having that discussion and having them involved in what money is in the context of our family. So when we go to the shop, we just don't go to the shop and buy some steak and they're not there. They're with us so they can see what it actually costs.

00;06;13;22 - 00;06;35;27
Keith John
You know, if you're going to spend $25 on a piece of steak, you don't want to be wasting that if you're not hungry because you just don't feel like eating it. Save it for tomorrow. So trying to have a very, very real relationship with money right down to the cost of bread or to the litre of milk or to the bag of chips that you're buying is, I think, really important.

00;06;35;27 - 00;06;59;24
Keith John
That's the first part. The second is having them accountable for their own money, have them get a job, work on the weekends, work while they're at Uni as mine do, and pay for things themselves so they understand just how long you have to work to buy a new pair of sneakers.

00;06;59;24 - 00;07;03;16
Karalee Katsambanis
That's right. And then you're not going to the bank of Mum and Dad.

00;07;03;19 - 00;07;21;07
Keith John
Yeah, of course. You know, it's, you know, sneakers are expensive. All kids want to have them. And that's, you know, they’re a big thing now. But, you know, if you've got to work four days to get a pair of sneakers or two weeks or whatever it is, you'll think twice about it. And I think that's a really important discipline.

00;07;21;07 - 00;07;40;28
Keith John
This is not about spoiling their fun. This is about teaching them the value of money, what you can get with it, what you can do with it. So for us, it really is that conversation piece. If they’re younger the comment just sort of going back to what we talked about before is we used to talk about this in our family a lot.

00;07;40;28 - 00;08;07;05
Keith John
It's you know, it's monkey see monkey do. If they see you treat money with respect and deal with it respectfully, they will as well. But if they're not there they can’t, children don't learn by being told. They learn by experience. And monkey see monkey do. It's just such an important part of that learning experience and their relationship with money and what it means to them, you know, as they grow older.

00;08;07;08 - 00;08;29;23
Karalee Katsambanis
Listener, we're speaking with Keith John, who is founder and Managing Director of Pioneer Credit an ASX listed company, and he is at the coalface of the cost of living crisis in Australia. We're talking about the poor levels of financial literacy. Give me a ring. 133 882 send me a text 0487 999 882 Keith before I let you go this evening, just my last couple of questions.

00;08;29;23 - 00;08;40;07
Karalee Katsambanis
I mean, debt is obviously a part of most people's lives. Are there products to avoid to ensure that people try and stay out of harm's way as best they can?

00;08;40;10 - 00;09;03;18
Keith John
Look, there are Karalee I mean, debt like everything. And if you use it in moderation, you use it appropriately. It can be a benefit to you. But the way products are sold now means they can be particularly harmful. So when you see a product that's available that only gives you, you know, a 4% fee, if you pay it back in a month, now you need to think about that.

00;09;03;18 - 00;09;25;07
Keith John
That's almost 50%, nearly half the amount again for a year. You know, those products are very expensive. I think buy now pay later has some really dangerous connotations to it. If you've got the money in your bank, why not just pay for it? And if you don't have the money and you need to, or you want it now think twice because do really need that product.

00;09;25;10 - 00;09;44;18
Keith John
Do you need the extra debt because you don't know what's coming around the corner, like I said at the beginning. The things that get people into trouble and not necessarily that they've overspent, they've spent to their limit it's life events, it's the things that happen to people every single day of the week. And you know, you can't avoid those.

00;09;44;25 - 00;09;49;24
Keith John
They happen to all of us. So you need to make sure you don't put yourself in a position that's going to harm.

00;09;49;26 - 00;10;08;22
Karalee Katsambanis
Okay, Keith, I was going to say just my last one. I mean, I mentioned at the very start of this interview, you've got more than a quarter of a million Australians that owe you $2 billion. These things do happen in life. But let's just say if people do get into trouble, what should they do?

00;10;08;25 - 00;10;33;26
Keith John
The first thing to do is, be honest with yourself so recognise that you've got a challenge and that you need to address it. The second is speak to the people you owe the money to. People are realistic, people understand your banks understand, we understand, Speak to them and talk through your circumstances. Invariably, most people just need time to get back on their feet.

00;10;33;28 - 00;10;56;09
Keith John
Everyone can provide that. And if you do that, I'm sure that you will relieve a lot of pressure for yourself and your family. And if you need more serious help someone else to sit down with you. There are financial counseling services available for free right across the country that can work through you or work with you in a more comprehensive manner.

00;10;56;12 - 00;11;03;00
Keith John
If you've got a lot of debts across a range of utility bills and banks and credit cards and the like.