Getting to a higher level of financial literacy in Australia

Share this article:

The practical benefits of improving financial literacy.

.

This month marks the 20th anniversary since the United States’ government under former President George W. Bush passed legislation officially proclaiming April as Financial Literacy Month.

Financial Literacy Month is quite a big deal in the U.S. Every April, all U.S. state governments, schools, and a wide range of organisations and companies, undertake various initiatives aimed at improving financial literacy, including educational workshops, financial events, and broader marketing activities.

The aim is not just to highlight to Americans the importance of being financially literate, but to give some practical guidance on how people of all ages can improve both their financial knowledge and economic wellbeing.

Australia is not at the same level in terms of having a national, co-ordinated approach to developing financial capabilities across the population.

Government-funded strategies have been limited to date. Private financial education programs are being run in some primary and secondary schools to help students learn about the basics of finance and money. But these programs are not part of the standard school curriculum.

Low literacy levels

The 2020 Household, Income and Labour Dynamics in Australia (HILDA) study, funded by the federal government, found after a survey of around 17,000 Australians that while income and wealth levels here are rising, financial literacy is low in different segments of the population.

The HILDA study included five financial literacy questions covering numeracy, inflation, portfolio diversification, risk versus returns, and money illusion (purchasing power).

Those in older age categories tended to achieve higher scores, although there were large differences in financial literacy scores across demographic groups and between individuals based on their level of education. Not surprisingly, it was lowest among young people aged between 15 and 24.

So, what are the practical benefits of having a good level of financial literary?

At the most basic level, it can help people to better manage their money. But even simple lessons, such as understanding how compounding works and the significant wealth benefits it can deliver over the long term, can have profound outcomes.

Investor levels still surging

It is evident that levels of financial literacy are not necessarily deterring individuals from investing.

According to the Australian Securities Exchange (ASX) Investor Study 2023, 10.2 million Australians were making investments outside of their family home and superannuation on the ASX when it conducted its research in November 2022.

Of those surveyed, around 20 per cent said they had only begun investing since the end of 2020. One-third said their first investment had been individual shares on the ASX, and for 14 per cent their first investment had been into an exchange traded fund (ETF).

Yet, having a higher level of financial literacy can potentially go a long way in guiding people on key principles such as the importance of setting financial goals and minimising costs, the roles of asset allocation and diversification, and the benefits of having a long-term, disciplined investment approach.

At a younger age, learning basic skills such as budgeting and saving can help a person to take their first investment steps, whether that’s saving up a deposit for a house or investing on the share market.

People in their 30s and 40s tend to be focused on securing and expanding their wealth, sometimes increasing their investment exposure to higher-risk assets.

Older age groups – especially those in their 50s nearing retirement or in their 60s who have already retired – can look to tilt their investments towards income-producing assets.

An ongoing process

In reality, building up financial literacy and knowledge at an individual level should be an ongoing process to prepare for different life stages.

These days, many people are learning the basics and building up their knowledge by reading financial books and listening to podcasts.

But one also should not overlook the important role of professional financial advisers in the financial literacy process, to receive considered advice at key life moments.

Many Australians probably recognise the benefits of receiving financial advice, but do not take the actual step of engaging an adviser.

That is a shame, because advice can go a long way to helping people plan well ahead so they can achieve a financially successful retirement.

Typically, an adviser can guide people in a wide range of areas including saving and budgeting, superannuation contributions, investment strategies, debt management, insurance coverage, and estate planning.

There is no doubt that more can be done on a broad co-ordinated level to improve financial literacy across Australia.

At the same time, there are also obvious steps that people can take themselves to improve their knowledge, and that can readily be accomplished with help from a professional adviser. 

 

 

 

By Balaji Gopal, Head of Client Experience, Vanguard
April 24
vanguard.com.au

Want to know more?

Do you have a question about something you've read in this article? Need more information? Want to book an appointment? Simply let us know below and we'll get back to you ASAP.

Share this article:

Get in touch

logo

General Advice Disclaimer | Privacy Policy

Contact Us

General Disclaimer

The information contained on this website is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Dr John Tickell is a registered Medical Doctor, who graduated at the University of Melbourne, Australia. Dr John has spent several decades travelling and researching the eating and living habits of the longest living, healthiest people on our planet.

The author may give opinions and make general or particular statements in this literature regarding potential changes of lifestyle habits based on experience and research. You are strongly advised not to make any changes or take any action as a result of reading or listening to this material without specific advice from your doctor, physician or registered Health Professional.

The author, the Publisher, the Editor and their respective employees or agents do not accept any responsibility for the actions of any person, or injury, loss or damage occasioned - actions which are in any way related to information contained herein.

Opinions and statements in this literature are based on verified research and experiences by the authors and are to be regarded as health and wellness advice.

Privacy Policy

What Personal Information Do We Collect?

The personal information that we collect will depend on your relationship with us and the service(s) you or your organisation have engaged us to provide or are interested in. It may include:

Name and contact information (including telephone and mobile number, email address and residential and postal address);

Individual information (including racial or ethnic origin(s), language(s) spoken, religious belief(s) and affiliation(s), date of birth, age, place of birth, gender(s), occupation(s), employment and qualification details, financial records, income details, asset listings, taxation records, bank account details, insurance policies, medical history, disability status, criminal record and Court records);

Payment and transactional information (including banking and credit card details);

Other personal or sensitive information (including information contained in communications or documents, any information required due to the nature of your matter, or information we are required to or permitted to collect by law).

Collecting Personal Information

HOW WE COLLECT PERSONAL INFORMATION

We may collect your personal information directly from you or in the course of our dealings with you. For example, we collect personal information from you or about you from:

Correspondence between you and us;

Meetings and interviews with us, telephone calls with us, the instructions you provide to us;

Visits to and submissions you make on our website;

Your interactions with our electronic direct mail and/or emails from our marketing campaigns (such as clicks on links included in these emails); and

Registration and forms you may fill in for our marketing-related activities and events.

WHY WE COLLECT, HOLD AND USE PERSONAL INFORMATION

We collect and hold your personal information for a variety of purposes, and you permit us to use it:

To provide you with our services and carry out our business functions;

For purposes related to the provision of our services such as , educational briefings, seminars and coaching and other service offering updates, conducting client satisfaction surveys and feedback requests, statistical collation and website traffic analysis;

Where you have consented to its use or disclosure;

Where we reasonably believe that use or disclosure is necessary to lessen or prevent a serious, immediate threat to someone's health or safety or the public's health or safety;

Where we reasonably suspect that unlawful activity has been, is being or may be engaged in and the use or disclosure is a necessary part of our investigation or in reporting the matter to the relevant authorities;

Where such use or disclosure is required under or authorised by law (for example, to comply with a subpoena, a warrant or other order of a court or legal process);

Where we reasonably believe that use or disclosure is necessary for the prevention, investigation, prosecution and punishment of crimes or wrongdoings or the preparation for, or conduct of, proceedings before any court or tribunal (or the implementation of orders of a court or tribunal or on behalf of an enforcement body);

To develop and improve our business, products and services; and

For any lawful purpose.

Where we wish to use or disclose your personal information for other purposes, we will obtain your consent.

HOW WE HOLD AND STORE PERSONAL INFORMATION

Your personal information is held and stored on paper, by electronic means or both. We have physical, electronic and procedural safeguards in place for personal information and take reasonable steps to ensure that your personal information is protected from misuse, interference, loss and unauthorised access, modification and disclosure:

Data held and stored on paper is stored in a secure premises.

Data held and stored electronically is protected by internal and external firewalls, high encryption and all access to electronic data including databases requires password access

Access to personal information is restricted to staff and contractors whose job description requires access. Our employees and contractors are contractually obliged to maintain the confidentiality of any personal information held by us.

We undertake regular data backups, with the data copied and backed up to multiple locations for redundancy purposes.

Our staff receive regular training on privacy procedures.