Would you describe yourself as financially literate?
At a weekend BBQ, if the conversation turns to finance, are you as confident talking about your finances as you are about your favourite TV series or footy tips?
Granted, it's not always dinner table conversation! But while some people take pride in having a good handle on their finances and financial plans, for others, the details are a bit of a mystery, and it's a subject 'better left to the professionals.'
In a recent study of global financial literacy, Australia ranks fairly well as a nation.
However, the study also revealed significant gaps between the financial literacy scores of Australian men and women, between rich and poor, and even between the different generations of Australians.
Which got us thinking...
As we live in a relatively wealthy, developed nation, what is being done to ensure more Australians are financially literate?
If you decided you needed to brush up your financial skills, where do you start?
So what is Financial Literacy?
Financial Literacy is our ability to understand how money works in the world, as well as how we earn it, manage it and spend it sustainably in our lives. When we are more financially literate, we are able to be more informed about what we do with our money, and make sure that we can provide a more sustainable financial future for ourselves and our families.
And how are we going currently?
On the surface: not bad.
Below the surface, not great.
In the Standard & Poor's 2015 Global Financial Literacy Survey, Australia ranked ninth worldwide (first in the Asia-Pacific region) for the percentage of adults who met their criteria for financial literacy.
On closer examination of the survey data, Australia did, however, take out first place in one chart.
We ranked higher than any other country surveyed for the gap in financial literacy between rich and poor. While just under three-quarters of adults living in the richest 60% of Australian households were deemed financially literate by the survey, only half those in the poorest 40% of households made the grade.
Furthermore, we ranked equal fifth for the greatest gap between the financial literacy of our men and women.
And it's not just individuals that are hamstrung by poor financial literacy. These trends were borne out in a survey by Intuit Financial Services, in which just 42% of Australian start-up owners managed to score 50% or better on a quiz testing basic financial literacy, with significant differences between genders and generations.
Why financial literacy matters
"Without an understanding of basic financial concepts, people are not well equipped to make decisions related to financial management." That's how Standard and Poor's put it when introducing their global financial literacy survey, cited earlier.
In our daily work as finance brokers, we speak with people who have varying degrees of financial literacy. We treat everybody equally, provide information and explanations of unfamiliar terms and concepts, and always do our bit to be transparent in what we're offering.
All the same, we often speak with people who have had bad experience with unscrupulous finance providers, because they simply didn't know what questions to ask.
So you want to improve your financial literacy?
Whether you're pretty savvy with money or the whole concept of finance makes you glaze over (if that's you, well done making it this far. Tune back in now - this is the good bit) - there are a heap of resources to help you get a better handle on all things financial.
From basic budgeting tools, to guidelines for investments and financial planning, we recommend you check out these resources from the Government, major companies and the not-for-profit sector.
Programs from the Australian Government
The National Financial Literacy Strategy
The good news is we weren't the first to recognise there is a problem with financial literacy in Australia!
In 2011 the Australian Securities and Investments Commission (ASIC) published the 'National Financial Literacy Strategy'. As the Government's flagship financial literacy program, the action plan is currently mid-rollout; scheduled to run from 2014 to 2017.
MoneySmart was designed for Australians who need help with their debt, who want to be more organised with their money, as well as those who want to build their wealth with guidance for investing and saving.
Resources available from the MoneySmart website include:
- Budget Planner
- Retirement Planner
- Debt Help
- Borrowing & Credit
- Great tools such as the MoneySmart Cars app, to help you work out the real cost of buying and running a car
To access Government resources to improve your financial literacy, visit: moneysmart.gov.au
Thinking back to your school days, how much of your study was devoted to becoming financially literate (beyond school banking, once a week)?
There was plenty of time dedicated to studying the size of angles and famous poets, but not much on filling out a tax return, organising a budget to pay off your HECS-HELP debt and how to choose a mortgage that best suits you.
ASIC has created the MoneySmart Schools program to help equip young Australians with financial smarts by providing information early on.
With the MoneySmart School program, students in both primary and secondary schools are introduced to topics such as 'Credit and Debt', 'First Job' and 'Reducing Spending', which help them with real life problems whilst at school, and once they graduate.
To see what schools are currently involved in the MoneySmart Schools program, visit: moneysmart.gov.au/teaching/moneysmart-schools
Programs from the Private Sector
In addition to these Government initiatives, there are a number of other programs running that are sponsored by the private sector.
Commonwealth Bank Foundation's 'Start Smart' - A series of free workshops and online resources to teach primary and secondary students money management skills. The program helps half a million students per year.
Bank of Queensland's 'ESSI Money' - is a virtual-reality computer program for secondary school students. In the game, students develop a basic understanding of Earning, Saving, Spending and Investing virtual dollars whilst learning how different financial decisions they make can have positive and negative consequences in the future.
The Davidson Institute - Westpac's financial education division, offering training and education services to schools, community groups and businesses, such as the Financial First Steps Workshops (with versions tailored to Indigenous communities and homeless youths).
Programs from Not-For-Profit Organisations
Not-For-Profit (NFP) organisations have also recognised the importance of making financial literacy a reality for all Australians.
10 Thousand Girl - Life and money makeover programs for improving the financial literacy of young Australian women, especially those in remote and regional communities.
Money Minded - Developed by the ANZ, Money Minded is a training program to develop skills in banking, budgeting and planning for the future, that is delivered by Not-For-Profit organisations such as Berry Street, The Smith Family, Brotherhood of St Laurence.
Saver Plus - A 10 month financial education program for low income individuals and families to help them develop savings habits and improve financial capability
View an extended list of the Not-For-Profit organisations who offer programs to improve financial literacy in Australia on the National Financial Literacy Strategy's community and not-for-profit page.
Financial literacy is a no-brainer
According to the Commonwealth Bank's Financial Literacy Report from 2010, by improving the financial literacy of the lowest quartile of the Australian population to the level of the top of the lowest quartile, there could be:
- 15,000 jobs created
- Increase in the annual income of Australia's least financially literate by 10%
- Increase in Australia's Gross Domestic Product by $6.2bn annually
We'd love to know if you agree!
Would you describe yourself as financially literate? How much did your education improve your understanding of financial matters that affect your life?
We'd love to hear your experiences and feedback on our Facebook Page.