Study shows Australians have low levels of financial knowledge
Australians have a low level of basic financial literacy, and Your Financial Wellness is calling on the Federal Government to take action.
The Sydney-based data analytics and financial wellness platform provides cloud-based solutions to customers of various Australian financial institutions. It has made a pre-budget submission calling for the government to appoint a Minister for Financial Literacy to deliver better outcomes for everyday Australians.
In its submission, Your Financial Wellness has also requested a review of the current national financial literacy strategy and the establishment of a 2030 taskforce following the review. Federal Treasurer Josh Frydenberg is set to deliver the federal budget on Tuesday, March 29.
Your Financial Wellness conducted an independent analysis recently that found that in Australia there was:
- A low level of basic financial literacy
- A strong link between financial literacy and financial wellness
- A lack of planning and goal setting
- The importance of owning a home is paramount to most people
- The need to have a financially secure retirement is the goal once a home is owned
Your Financial Wellness co-founder and chief executive Alexander Hassall (pictured) said there is an established link between a financially literate society and financial wellness.
“The COVID-19 pandemic has ushered in many changes,” he said. “YFW considers it is now timely and appropriate to review Australia’s financial literacy position. It is vital to ensure that the enormous wealth transfer from baby boomers to their children isn’t squandered, and that future generations have an improved start in life through sustained and tailored programs to support improved financial literacy.
“Successive governments have tried to improve financial literacy. We believe that this improvement should be delivered by the financial institutions whose role it should be to ensure their customers better meet their goals and aspirations via an improved level of financial literacy.”
YFW’s findings about poor financial literacy are backed up by recent research from Choosi, which found that one-third of Australians don’t understand the factors that impact their credit score, 50% worry about their debt, and many don’t understand how buy now, pay later works, while over 30% would use buy now, pay later even if they had a maxed out credit card or no income source.
“A new and dynamic approach to financial literacy is needed to avoid the mistakes of the past being repeated for future generations,” Hassall said.
Your Financial Wellness has made seven recommendations to improve financial wellbeing across Australia.
1. Minister for Financial Services and Financial Literacy
Hassall said financial literacy needed renewed vigour and attention.
“We propose adding financial literacy to the title of Minister for Financial Services. While this change may be seen as cosmetic, it is much more than that,” he said. “Having a Minister for Financial Literacy will add weight to the issue, add an increased policy lens and create more consumer awareness and better outcomes.”
2. Review the National Financial Literacy Strategy
Hassall said as a first task, the Minister for Financial Services and Financial Literacy should review the National Financial Literacy Strategy and other related programs to determine if its ‘fit for purpose’.
3. Mental Health and Financial Literacy Alignment
“We see the need for better alignment between financial literacy programs and mental healthcare providers via a Financial Wellness Toolkit for all medical practitioners and financial counsellors,” he suggested.
4. Financial Literacy Taskforce
Hassall said following the review of the National Financial Literacy Strategy, YFW recommends the establishment of a 2030 Financial Literacy Taskforce to develop a clear set of deliverables for key consumer segments, including women, 18-35s and high school students.
5. APRA guide on financial literacy
While not seeking further regulation, Hassall said a principles-based guide would achieve the purpose. “It wouldn’t burden banks with red tape but would provide a useful operating framework to improve consumer outcomes, which would provide additional stability and strength to the financial system,” he said.
6. Establish financial wellness criteria
“With financial wellness now in vogue, it is important for government to have data it can rely on to assist policy decisions and objectives,” he said. “Your Financial Wellness recommends government is attentive to this emerging space and applies rigour when dealing with financial wellbeing data.”
7. Support for financial literacy investment
Hassall said Your Financial Wellness has seen the benefits of organisations working with their customers to achieve better financial outcomes.
“We see financial institutions being a key driver of financial literacy,” he noted. “Support for entrepreneurial spirit and innovation in financial literacy should be considered.”
