Section outline

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    General

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    Understanding Your Financial World

    Welcome to Understanding Your Financial World!

    Events on the other side of the world, as well as more locally, impact daily on the lives of New Zealanders. Those events influence us in a number of ways, including affecting our personal finances. At the end of this course you will be able to demonstrate that you are aware of what some of those influences are and how they affect your financial world.

    This course is intended to provide the background for you to manage your personal financial plans and understand the implications of changes, whether globally, regionally, nationally or locally, on your personal finances and the management of your personal financial plans. The course is a stand-alone course, although it can be taken as a contributing course for the Advanced Certificate in Personal Financial Management. The coursework is not intended to be onerous, as we fully understand that you need to fit the coursework around your work and family lives. The course cannot, therefore, be comprehensive and is not intended to qualify you to give financial advice in a professional capacity. If you wish to study to become a financial adviser after this course there are courses available for you to do this. If you find that you finish the required coursework quickly and are interested in learning more, some suggested material and activities are provided. These are entirely optional and you do not have to study or complete them.

    At the end of this course, you should be able to read the news with a more critical view of its impact on your personal financial plans.

    We have included a guide to using this site. If you have any problems navigating your way through or using this site please refer to the guide.

    • The News forum link below is to remind you that we will post news and announcements about the course using this forum.  You do not have to do anything as the news will be automatically sent to the e-mail address you have given us. If you click on the link the forum will show all the news that we have posted. You cannot reply or comment in this forum. If you want to comment on what has been posted, or ask a question about the course or any of the topics, please use the Course discussion link below.

    • News forum

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      Your tasks for this week

      Activity

      Please open the link to Course discussion below and share your objectives and expectations for the course and how you think you might use your learning. This is your opportunity to suggest topics that might not be covered in this, or other, Fin-Ed Centre courses.

    • Course discussion Forum

    • Please update your profile; click on this link getting started guide for instructions on how to do this.

    • Your final task this week is to start a reflective journal. A reflective journal helps you to learn and make sense of your learning. A link is provided to some background material for writing a reflective journal and some tips on how to write one. A template is also provided to help you to do this. Maintain your reflective journal throughout this course and submit it at regular intervals. A submission link will be provided in the weeks the journal is due.

    • Guidelines for maintaining a reflective journal File
    • Template for reflective journal File
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    Topic 1

    Week 1: An overview of the financial system and global influences

    Week 1 consists of two parts; the financial system and global influences. At the end of this week you will be able to demonstrate an understanding of the financial system in New Zealand and be starting to develop an awareness of the language of finance. The introduction to global influences introduces the concept of balance of payments and the exchange rate and highlights some topical current events that impact on New Zealand.  At the end of this you will be able to demonstrate that you are aware of some of the global influences have an effect on your finances.

    Your tasks for Week 1

    Reading

    Please read pp5-19 of the article by Mortlock (2003) . This section of Mortlock's (2003) article describes New Zealand's financial system.  It is slightly dated in terms of the numbers and sizes of financial institutions but the key elements of the financial system are unchanged. You can access the article by using the link to the Reserve Bank website or by clicking on the pdf file link.

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    Topic 2

    Week 2: Fiscal policy

    At the end of Week 2 you will be able to demonstrate that you understand the Government’s role in the financial system and how fiscal policy affects everyday life in New Zealand.

    This topic will help you to understand what fiscal policy means, the fiscal policy tools used by Governments, how public debt is managed and the effect of fiscal policies on demand and personal finances.

    Your tasks for Week 2

    Reading

    Please read the following summary of pp 337-344 of Stewart and Rankin (2008). This reading will give you an appreciation of fiscal policy and its implications for personal finances.

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    Topic 3

    Week 3: Monetary policy

    At the end of Week 3 you will be to demonstrate that you understand the Government’s role in the financial system and how monetary policy affects your finances.

    This topic will help you to understand what monetary policy is, who's involved in setting monetary policy, what it involves and how monetary policy affects your investments or borrowings.

    You will also be able to understand how fiscal and monetary policy are linked and how they impact on financial markets.

    Your tasks for Week 3

    Reading

    Please read the summary of pp287-289 Sloman and de Boer (2009) in the following file for an understanding of the role of the Reserve Bank of New Zealand.

    • The Central Bank File

    •  and the summary of pp322-331 Stewart and Rankin (2008) for an explanation of monetary policy.

    • Monetary Policy File

    • Please read the following factsheet explaining how the OCR works.

    • What is the OCR (link) URL
    • What is the OCR? (pdf) File
    • Effect of the OCR File

    •  To round off the discussions of fiscal policy and monetary policy, please read the summary of pp344-349 Stewart and Rankin (2008) which provides an explanation of how fiscal and monetary policy are linked.

    • The Link between Fiscal and Monetary Policy File

    •  Activity

      Follow the format of the Powerpoint presentation Effect of the OCR above and show the effect of a decrease in the OCR (it does not have to be in Powerpoint - it can be hand drawn if that's what you feel comfortable with). Please submit your diagram using the following link.

    • Submit your diagram of the effect of a decrease in the OCR using this link. Assignment

    • Additional resource

      For an alternative explanation of monetary policy you might want to read the following webpage:

    • A short explanation of monetary policy URL
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    Topic 4

    Week 4: Financial markets and registered banks

    Week 4 is in two parts.  The first part completes the discussion on fiscal and monetary policy by looking at financial markets.  In particular, focus is given to money markets and how they are used to enact monetary policy. The second part begins the discussion on some of the financial institutions that you may be using in your personal financial management. These institutions include depository and non-depository institutions.  The first of these to be discussed this week are registered banks (which are the major depository institutions in New Zealand).

    At the end of Week 4 you will be able to show that you are aware of financial markets, some money market terms in common usage, the essential characteristics of each type of money market security, and their place in personal finance management. As well, you will understand the essential characteristics that define a registered bank.

    Your tasks for Week 4

    Reading

    Please read the summary of pp 86-91 Parry, Wirth and Bennett (2009) for an explanation of the roles of money markets.

    • Financial Markets File

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      Banks that have the status of 'registered bank' in New Zealand is listed by the Reserve Bank of New Zealand and a link to that list is provided below. Look also at the Reserve Bank's banking supervision handbook for the conditions and process for obtaining registered bank status and the key prudential requirements of being a registered bank.

    • Registered banks in New Zealand URL
    • Bank Registration URL
    • Banking supervision handbook URL

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      Activity

      You will have seen from the bank registration process that organisations wishing to be registered as a bank in New Zealand must meet rigorous standards and conditions. List three reasons why you think such high hurdles are necessary.

    • Reasons for rigorous conditions for bank registration Quiz

      There is a glitch in the system so please ignore the wording of the question when you open the quiz. Please answer the following question in the box provided when you open the link to the question:

      Organisations wishing to be registered as a bank in New Zealand must meet rigorous standards and conditions. List three reasons why you think such high hurdles are necessary.

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      Please submit the first instalment of your reflective journal using the following link.

    • Submit first instalment of your reflective journal Assignment
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    Topic 5

    Week 5: Non-bank deposit takers and non-depository institutions

    Week 5 continues the discussion of financial institutions in New Zealand. This week's focus in on those depository institutions known as non-bank deposit takers, and non-depository institutions such as insurers and fund managers.  At the end of this week you will be aware of the different types of depository and non-depository institutions in the New Zealand market and their characteristics.  In particular you will be able to distinguish between banks and non-bank depository institutions, as well as non-depository institutions, understand the product markets they operate in and the relative riskiness of each.

    Your tasks for Week 5 

    Reading

    Please read the following article by Barker and Javier (2010) for an understanding of what non-bank deposit takers are and how they are regulated in New Zealand.

    • Regulating non-bank deposit takers File

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      The following link takes you to a New Zealand Government web-page that concisely summarises how to invest in shares in New Zealand. Please read this page to get an understanding of how to make a direct investment in shares.

    • Buying shares in New Zealand URL

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      Insurers in New Zealand must be licensed.  Please read the following web-page by the Reserve Bank of New Zealand to understand why. A list published by the Reserve Bank of insurers currently licensed is also provided to give you an appreciation of the number and diversity of insurers in New Zealand.

    • Regulating insurers URL
    • Licenced insurers URL

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      The following link takes you to the Sorted web-page that explains what managed funds are.  Please read this.

    • Managed funds URL

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      An important piece of information in understanding the riskiness of financial organisations is credit ratings. Please read the brochure 'Know your credit ratings' (Reserve Bank of New Zealand, 2010) to get an understanding of what credit ratings are and what they mean.  For more detail, please read the Reserve Bank's "User's Guide to Credit Ratings".

      Also, attached for you to look at are listings of registered banks' and non-bank deposit taking institutions' credit ratings published by the Reserve Bank.

    • Know your credit ratings File
    • User's guide to credit ratings (pdf) File
    • Bank credit ratings URL
    • Non-bank deposit taking institutions' credit ratings URL

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      Activity

      Please take the following quiz on financial institutions and credit ratings.

    • Non-banks and credit ratings Quiz
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    Topic 6

    Week 6: The Financial Markets Authority

    At the end of Week 6 you will be able to demonstrate an awareness of the role of the Financial Markets Authority and its jurisdiction in the regulation of financial markets.

    Your tasks for Week 6

    Reading

    Please look at the following links to the FMA web-site. You will see from these links the role and purpose of the FMA and that the FMA is responsible for administering an extensive range of legislation associated with New Zealand's financial markets.

    • Role and purpose of the FMA URL
    • Who the FMA regulates URL
    • FMA's priorities URL

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      For an understanding of how the FMA enforces the legislation it is responsible for, please look at the following page from the FMA web-site.

    • How the FMA regulates URL

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      Activity

      Please list three situations when the FMA might intervene. 

    • Factors requiring FMA intervention Quiz

      Llist three factors or situations that might require the FMA to intervene in the financial markets.

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    Topic 7

    Week 7: The Reserve Bank of New Zealand

    The Reserve Bank of New Zealand has two primary roles.  In Week 3 we encountered the Reserve Bank's role in setting monetary policy. As well, the Reserve Bank has a responsibility for regulating and supervising financial institutions. At the end of Week 7 you will be able to demonstrate an awareness of that governance and supervisory role.

    Your tasks for Week 7

    Reading

    Please watch the following video from the Reserve Bank of New Zealand web-site to get an appreciation of what the Reserve Bank does in governing financial institutions.

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    Topic 8

    Week 8: Tying it all together

    At the end of Week 8 you will be able to demonstrate an that you need to understand, and continually monitor, the financial world and its relevance to you today and over time.

    Your tasks for Week 8

    Reading

    Please look at the following Incademy web-site on how to read the financial pages. It is mainly oriented toward investing in the sharemarket but does give you an idea of what sort of information to look for in managing, not just shares, but also other aspects of your personal finances. There is a lot to this site but as a minimum you should read pp1-3 and 17-20 inclusive.

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    Topic 9

    Additional resources

    Here are some additional resources that you might find helpful:

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    Topic 10

    References

     

    Barker, F. and Javier, N. (2010). Regulating non-bank deposit takers. The Reserve Bank Bulletin, 73(4), 5-18.

    Bollard, A. and Hannah, M. (2012). A tale of two crises. Retrieved from http://www.rbnz.govt.nz/speeches/4659119.html

    Business News Daily. (2012, November 28). What is fiscal policy. Retrieved from http://www.businessnewsdaily.com/3484-fiscal-policy.html

    Clerk of the House of Representatives (Producer). (2015, May 21). Budget Statement 2015 - Part 1 [Television broadcast] Wellington, New Zealand: Parliament TV. Retrieved from http http://www.inthehouse.co.nz/video/37076

    Clerk of the House of Representatives (Producer). (2015, May 21). Budget Statement 2015 - Part 2 [Television broadcast] Wellington, New Zealand: Parliament TV. Retrieved from http://www.inthehouse.co.nz/video/37077

    Financial Markets Authority. (2015). How we regulate. Retrieved from http://fma.govt.nz/fmas-role/what-we-do/our-role/

    Financial Markets Authority. (2015). Our role. Retrieved from http://fma.govt.nz/fmas-role/what-we-do/our-role/

    Financial Markets Authority. (2015). Strategic priorities. Retrieved from http://fma.govt.nz/fmas-role/what-we-do/strategic-priorities/

    Financial Markets Authority. (2015). Who we regulate. Retrieved from http://fma.govt.nz/fmas-role/what-we-do/who-we-regulate/

    Government of New Zealand. (2015). Fiscal strategy report 2015. Retrieved from http://www.treasury.govt.nz/budget/2015/fsr/b15-fsr.pdf

    Government of New Zealand. (2015). Budget 2015 Executive Summary: A plan that's working. Retrieved from http://www.budget.govt.nz/budget/pdfs/execsumm/b15-execsumm.pdf

    Incademy Investor Education (2012). How to read the financial pages. Retrieved from http://www.incademy.com/courses/How-to-read-the-financial-pages/What-are-the-financial-pages/1/1070/10002

    Migone, P. and Levy, D. (2012). Budget 2012: English's nickel and dime Budget. Retrieved from http://www.stuff.co.nz/business/budget-2012/6975072/Budget-2012-Englishs-nickel-and-dime-Budget

    Mortlock, G. (2003). New Zealand's financial sector regulation. The Reserve Bank Bulletin, 66(4), 5-49.

    New Zealand Institute of Economic Research. (2013). Fiscal Policy. Retrieved from http://nzier.org.nz/economics/fiscal-policy

    New Zealand Government. (2012). Buying shares: How to buy shares in New Zealand. Retrieved from http://www.investmentnow.govt.nz/buying-shares-in-a-company_page53.html

    New Zealand Herald. (2015). Budget 2015: How it affects you. Retrieved from http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11452450

    Parry, J., Wirth, C., and Bennett, A. (2009). Fundamentals of finance, 3rd ed. Pearson: Auckland New Zealand.

    PWC. (2015). NZ Budget 2015. Retrieved from http://www.pwc.co.nz/publications/nz-budget-2015/

    Radio New Zealand. (2015). Budget 2015: What you need to know. Retrieved from http://www.radionz.co.nz/news/political/274271/budget-2015-what-you-need-to-know

    Reserve Bank of New Zealand. (2012). About us. Retrieved from http://www.rbnz.govt.nz/about/

    Reserve Bank of New Zealand. (2012). Bank registration. Retrieved from http://www.rbnz.govt.nz/nzbanks/0091622.html

    Reserve Bank of New Zealand. (2012, July 23). Credit ratings of banks in New Zealand. Retrieved from http://www.rbnz.govt.nz/finstab/banking/4560094.html

    Reserve Bank of New Zealand. (2012, May 4). Credit ratings of non-bank deposit-takers in New Zealand. Retrieved from http://www.rbnz.govt.nz/finstab/nbdt/creditratings/3905820.html

    Reserve Bank of New Zealand. (2012). Financial stability. Retrieved from http://www.rbnz.govt.nz/finstab/index.html

    Reserve Bank of New Zealand. (2012). Key prudential requirements. Retrieved from http://www.rbnz.govt.nz/finstab/banking/4504824.html

    Reserve Bank of New Zealand. (2012, March). Know your credit ratings. Reserve Bank of New Zealand: Wellington, New Zealand

    Reserve Bank of New Zealand. (2012). List of licensed insurers in New Zealand. Retrieved from http://www.rbnz.govt.nz/finstab/insurance/register/

    Reserve Bank of New Zealand. (2012). Overview of the banking oversight regime. Retrieved from http://www.rbnz.govt.nz/finstab/banking/4504811.html

    Reserve Bank of New Zealand. (2012). Regulation of insurance sector. Retrieved from http://www.rbnz.govt.nz/finstab/insurance/4267910.html

    Reserve Bank of New Zealand. (2012, July 23). Register of registered banks in New Zealand. Retrieved from http://www.rbnz.govt.nz/nzbanks/0091622.html

    Reserve Bank of New Zealand. (2012). What is the official cash rate?. Retrieved from http://www.rbnz.govt.nz/monpol/about/0072140.html

    Slack, A. (2012). Back to Black. Retrieved from http://berl.co.nz/economic-insights/macro-picture/government-and-fiscal-policy/back-to-black/

    Sloman, J. and de Boer, P. (2009). Economics. Pearson: Auckland, New Zealand

    Sorted. (2012). A-Z Guides. Retrieved from https://www.sorted.org.nz/a-z-guides

    Sorted. (2012). Managed funds. Retrieved from https://www.sorted.org.nz/a-z-guides/managed-funds

    Stewart, J. and Rankin, K. (2008). Economic concepts and applications: The contemporary New Zealand environment, 4th ed. Pearson: Auckland, New Zealand.

    The Financial Times. (2013). Financial Times Lexicon: Monetisation. from http://lexicon.ft.com/Term?term=monetisation