In YourLifeChoices’ 2018 Financial Literacy Survey, 72.7 per cent of the 2342 participants mostly aged 60-plus said they managed their financial affairs either well or very well. However, the second edition of an annual report developed by Deloitte Access Economics reveals that almost one in two Australians (48 per cent) were unable to pass its test for financial literacy and wellness.
The Financial Consciousness Index (FCI), commissioned by comparethemarket.com.au and developed by Deloitte, tested 3000 individuals on a range of factors that make a person financially conscious – from financial sophistication and financial willingness, to financial capability and financial wellness.
It revealed that 7.5 million Aussies were struggling financially – two million more than last year. This group said they often struggled to pay their bills, were not saving money regularly and felt insecure in their jobs.
The first FCI report found that the higher a person’s income and education, the higher his or her FCI score. However, this year’s study found that the gap in financial consciousness is narrowing between very high and very low income earners, with each scoring lower this year. Those on incomes of less than $40,000 had an FCI score of 43 compared with 44 last year, while those earning more than $190,000 scored 58 this year and 62 last year.
Similarly, while those with university degrees have higher FCI scores – 56 for those with postgraduate degrees and 52 for those with undergraduate degrees, compared with 44 for those with only high school education – those with undergraduate degrees saw the biggest drop of three points in their score.
Financial consciousness improved with age, the survey found, but only up to 70 and began to drop around retirement age.
Those aged 55 to 64 scored 50, compared with 44 for 18 to 24-year-olds and 48 for 25 to 34-year-olds. However, FCI scores drop by three points once they reach 70.
The FCI report is based on a survey that assesses financial sophistication (the diversity and types of financial products we own and how we understand the impacts of decisions on our financial outcomes), financial willingness (how motivated we are to be actively involved in financial decision-making), financial capability (our awareness and understanding of financial concepts) and degree of control (whether we believe our actions determine our financial outcomes).
Comparethemarket.com.au banking general manager Rod Attrill said the latest index reflected the many events in the past 12 months that could have negatively affected people’s financial situations.
“The property market has suffered, the speculation of cash rate falls taking months to finally be announced swayed confidence, the banking royal commission has diminished people’s trust in financial institutions, and retailers have seen a significant slump in spending,” he said.
“The result is that Australians are feeling more uncertain and less confident about their future.”
You can take the FCI test here.
Have the past 12 months had a significant negative effect on your finances? Are you feeling less secure about the future? Do you believe you are handing things as well as possible?
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