The leader of a finance education group has reflected on the effect of modern payment systems on kids’ financial literacy.

The not-for-profit Financial Basics Foundation provides free programs and resources to help teenagers become more money savvy.

The group’s recent survey of 1,100 students from high schools around the country found most were confused about credit cards.

More than half the students surveyed thought a $2,000 credit card debt would take less than three years to pay off, making the minimum repayments at an 18 per cent interest rate.

It would actually take over 15 years.

In another test, less twenty per cent of five students thought there was no advantage in making any repayments until the end of the interest-free period, while a third of students thought interest was not charged on outstanding balances at the end of the interest-free period.

Even so, 85 per cent of students reported having a reasonable understanding of how credit works.

“There was a huge difference between their confidence around what they thought they knew and the reality of what they did know,” Financial Basics Foundation chief Katrina Birch told the ABC.

“The fact that credit is so readily available to young people, there's a huge risk for the level of debt they could get into early on in their life.”

“It's buy now, pay later, it's interest-free terms.”

She said in a world of cashless payments and online shopping, young people’s lack of understanding puts them at risk of financial failure.

“There are so few barriers to spending, we're opening up young people to the possibility of getting into quite difficult financial situations down the track,” Ms Birch said.

The Financial Basics Foundation offers a game called ESSI Money Challenge that can be used to simulate real-life financial decisions.

Ms Birch said she would like to see mandatory financial literacy lessons for all students, and called on parents to talk regularly with their kids about finance and money.

The Australian Securities and Investments Commission (ASIC) is working on the roll-out of financial literacy programs into schools, and already offers resources on its Money Smart website.