Financial literacy - Women understanding money - National Financial ...

Women understanding money

Financial literacy Financial literacy Women understanding money

Financial literacy


© Commonwealth of Australia 2008 ISBN: 978 1 74207 648 5 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600 or posted at http://www.ag.gov.au/cca.

CONTENTS Foreword

iv

From the chairman V

ii.

Executive Summary

1

Findings at a glance

2

Some observations

5

Chapter 1: Introduction

8

The Survey in context

8

Survey and report overview

9

Chapter 2: How women manage money

10

Budgeting

10

Saving

12

Investing

14

Credit and debt

16

Planning and retirement

18

Protecting money

20

Information and advice

22

Conclusion

25

Chapter 3: What women think about money

27

Introduction

27

ability and understanding

28

Learning

30

confidence

31

Attitudes and behaviours

34

CONCLUSION

54

APPENDIX 1: FINANCIAL LITERACY – AUSTRALIANS UNDERSTANDING MONEY – SUMMARY OF FINDINGS

57

Appendix 2: findings

61

APPENDIX 3: SURVEY METHODOLOGY

70

Appendix 4: Financial Literacy Foundation

74

Financial literacy


iii.

Foreword The Australian Government recognises the importance of creating opportunities for all Australians to learn more about money and in this regard I am pleased to introduce the Financial Literacy Foundation’s Financial literacy – Women understanding money report. This report builds on the findings of the Financial literacy – Australians understanding money report, which examines the attitudes and behaviours of all Australians when it comes to using and managing money, by examining the findings for women in greater detail. Women have more choices about how they manage their money than ever before. There are credit cards, mobile phones, internet banking, and a range of investment options. Women are often the ones making day-to-day spending decisions, as well as important decisions about their financial future. In this context I am pleased to support the recommendation of the House of Representatives Standing Committee on Economics, Finance and Public Administration’s report on Improving the superannuation savings of people under 40, that the Foundation, in association with the Office for Women, respond to the financial literacy needs of women with respect to superannuation. The Foundation and the Office for Women have created Women Understanding Money, a financial literacy resource for women of all ages that discusses financial issues of personal interest to women and frames superannuation in the context of broader money management issues. It consists of a series of 14 information sheets and is freely available in print and electronic form either by contacting the Foundation or visiting the Foundation’s website www.understandingmoney.gov.au. It will also be available through a range of other government, industry and community sector sources. This report represents an important complement to the Women Understanding Money resource. It contains valuable insights for those involved in the development and delivery of financial literacy resources and services for women. It presents women’s views about the money management issues where they are interested in learning more. Investing, planning for the future and retirement feature prominently amongst these. It also provides valuable information about the way women prefer to learn and measures the extent to which certain attitudes can stop women from learning. Again, these attitudes have a significant impact on the way women manage their money when it comes to planning and retirement. I commend the report to you.

Senator the Hon Nick Sherry Minister for Superannuation and Corporate Law April 2008

iv.

From the chairman Welcome to the second of the Financial Literacy Foundation’s reports on Australians and money. The first report, Financial literacy – Australians understanding money, takes a detailed look at Australians and their money: how we manage it and what we think about it, as well as what we need to learn and what stops us from learning. This report, Financial literacy – Women understanding money, takes a closer look at the findings for women. There are some basic facts about women and money that are well recognised: lower average incomes, broken work patterns – usually for family reasons – lower participation rates when it comes to superannuation and in the end, less superannuation. Not only that, women’s savings need to go further because they live longer. There’s absolutely no doubt that these are big issues for many women and their families, and they’re important to keep in mind in any discussion about women and money. Some of the findings of this research will also sound familiar: women tend to be less confident in their ability to manage money, less comfortable with their financial situation and more conservative in their approaches to managing money. But there’s a lot more to it than that. If you take a closer look at the findings, you’ll see some inconsistencies that indicate that both women and men tend to overestimate their ability to manage money well. Confidence can be a great thing in life, but too much of it can get in the way of learning and in this case, learning to manage money better. The interesting thing is that, relative to their ability, women are generally more likely to want to learn about managing money better. When it comes to taking charge of your money, there’s no better place to start than wanting to learn. This report tells us that many women already have the budgeting and saving habits that are essential to putting yourself in charge of your money. When it comes to investing, planning for the future and retirement – all the things that allow you to take control of your money in the longer term – women are less confident in their ability. The important thing is that women want to learn more about these issues. To make the most of this desire to learn, we need to respond to what women say they are looking for when it comes to managing money better – information that meets their needs, responds to their concerns and comes from the sources they prefer. This report is an incredibly rich source of information for anyone working with women to achieve their financial goals and I encourage you to make use of it.

Paul Clitheroe Chairman, Financial Literacy Foundation Advisory Board April 2008

Financial literacy


v.

vi.

Executive Summary Financial markets have developed substantially in the context of long-term reforms directed at increasing market efficiency and consumer choice, with consequential benefits for individuals and the wider economy. Financial literacy initiatives are directed at providing Australians with the knowledge and skills to take advantage of the increased opportunities and choices offered by more sophisticated financial markets. In the context of an ageing population, successive initiatives by government have also resulted in a substantial flow of consumer savings to superannuation, further underlining the importance of consumers having the capacity and the confidence to make informed financial decisions. More competent, confident and engaged consumers of financial services offer the prospect of improved household savings performance, reduced dependence on Government allowances, and lower levels of problem debt.1 More broadly, they can drive competition and market efficiency, reduce costs for business and create the potential for reduced regulatory intervention.2 For these benefits to be achievable, consumers need to have ‘the ability to make informed judgements and to take effective decisions regarding the use and management of money.’ 3 The wide range of consumers’ individual abilities and understanding, attitudes and behaviour, and needs and preferences, further extends the challenge of providing consumers with the motivation, knowledge and skills to make informed choices in engaging with financial services markets. The scope of the task for governments and other financial literacy service providers is broader and more challenging than simply providing comprehensive and well-intentioned education resources. There is no shortage of quality resources available to consumers with an active interest in building their money skills. The challenge is to promote engagement and motivation for those who, either through lack of exposure to learning opportunities or lack of engagement with existing information and resources, are not seeking to build their money skills. The findings of the Financial literacy – Australians understanding money report, a summary of which is at Appendix 1, made a significant contribution to our understanding of Australians’ attitudes and behaviours when it comes to using and managing money, as well as the attitudes that stop people from engaging with money issues. This report builds on those findings, by examining the findings for women in greater detail and comparing them with the findings for men. The findings relate to respondents’ self-assessed ability, understanding, attitudes and behaviour in using and managing money, complementing the findings from other Australian surveys that aimed to provide an objective measure of competency in financial matters.

1

2

The September 2007 report on Home loan lending by the House of Representatives Standing Committee on Economics, Finance and Public Administration concluded that the work of the Financial Literacy Foundation was important to improving financial literacy so that consumers understand the implications of their decisions when taking on excessive debt, pp. 29-31. ‘Financially educated consumers help increasingly complex financial markets to operate efficiently. By their greater ability to compare risk-return characteristics of different financial products offered by various intermediaries (as well as differing costs involved), financially literate consumers enhance competition. In addition, by demanding products more responsive to their needs, they also encourage providers to develop new products and services, thus increasing competition in financial markets, innovation and improvement in quality.’ OECD, Improving financial literacy: analysis of issues and policies, p. 35.

3

S Schagen and A Lines, Financial Literacy in Adult Life, National Foundation for Educational Research, Slough, United Kingdom, 1996, p. ii.

Financial literacy


1.

Findings at a glance How women manage money Budgeting Women are highly confident in their ability to budget, but around a half say that they don’t budget regularly. While women report better budgeting habits than men, they are less likely to think they’d get by in a financial emergency. 91% of women say they have the ability to budget (men 90%) 80% say they think about ways to reduce their spending (men 78%) 44% say they do not budget regularly for their day-to-day finances (men 52%) 77% say they could get by for some time in case of a financial emergency (men 82%)

Saving Women are highly confident in their ability to save and the majority of women say they have good savings habits, but one in five say they don’t save. Women and men report similar attitudes and behaviours when it comes to saving but women are more likely to say they save before they spend. 88% of women say they have the ability to save (men 88%) 22% say they don’t save (men 21%) 62% say that they save regularly (men 63%) 52% say they save first and spend second (men 48%) 42% say they spend first and save second (men 44%)

Investing Compared to budgeting and saving, fewer women are confident in their ability to invest, but the majority are interested in learning more. Women are also less confident than men when it comes to investing, and are less likely to take factors such as risk and return into consideration when making an investment decision. 63% of women say they have the ability to invest money (men 75%) 64% say they own or are currently paying off the home they live in (men 60%) 16% say they have an investment property and 43% say they have other investments (men 20% and 49% respectively) 30% would consider both risk and return when choosing an investment (men 38%) 68% are interested in learning more about investing money (men 71%)

Credit and debt Women are highly confident in their ability to deal with credit cards and manage debt. Most women say they can manage debt, but some say they only make minimum repayments on credit card debt and loans and that they get into debt by buying things they can’t afford. Women are less likely than men to say that they have credit cards and loans and more likely to have other sources of debt. Women are also less likely to feel comfortable with their level of debt. 83% feel confident with credit cards and 88% of women say they can manage debt (men 84% and 90% respectively) 74% say that they regularly pay the total balance owing on their credit card when it is due (men 79%) 18% usually only make the minimum repayment on loans and 14% do the same with credit cards (men 16% and 13% respectively) 21% say they will use debt to buy things they can’t afford (men 22%) 71% say they have a credit card, 55% say they have loans and 23% say they have other debt (men 73%, 57% and 21% respectively) 18% of women say they are uncomfortable with their level of debt (men 15%)

2.

Planning and retirement Compared to budgeting, saving, dealing with credit cards and managing debt, women are less confident in their ability to plan for their long-term financial future and ensure enough money for retirement. Women are also less confident than men when it comes to planning for their long-term financial future and ensuring enough money for retirement, but they are interested in learning more about planning for their financial future, including in retirement. 77% of women say they have the ability to plan for their long-term future (men 84%) 60% say they have the ability to ensure enough money for retirement (men 65%) 78% say they have a superannuation fund (men 84%) 12% say employer funded superannuation will meet their retirement needs (men 16%) 74% say they have personally thought about long-term financial plans for the future and retirement (men 78%) 78% are interested in learning more about planning for their long-term financial future and 72% are interested in learning more about ensuring enough money for retirement (men 77% and 70% respectively)

Protecting money Women are highly confident in their ability to protect their money, including through choosing appropriate insurance, understanding rights and responsibilities when dealing with money, and recognising a scam. However, fewer women are confident in their ability to invest and the findings indicate that the majority wouldn’t take key considerations into account when making an investment decision, so they may be more vulnerable to scams than they think. Women and men report similar attitudes and behaviour when it comes to protecting money. 81% of women say they have the ability to choose appropriate insurance (men 82%) 85% say they understand their rights and responsibilities when dealing with money (men 86%) 87% say they can recognise a scam or an investment scheme that seems too good to be true (men 89%) 63% of women say they have the ability to invest money (men 75%) 70% would not consider both risk and return when choosing an investment (men 62%)

Information and advice Women are highly confident in their ability to get information about money with a majority having sought financial information or advice from an accountant/tax agent or a bank, and just over a half from a financial adviser. Fewer women are confident in their ability to understand financial language, consistent with their level of confidence in ability to invest and ensure enough money for retirement, and most are interested in learning more. Women and men report similar abilities in obtaining information about money and dealing with financial service providers but there are substantial differences in their preferred sources of information or advice. Women are more likely than men to consider getting information and advice from financial advisors, banks, community services and government sources. 84% of women say they have the ability to get information about money (men 85%) 81% say they have the ability to deal with financial service providers (men 82%) 66% say they have used an account/tax agent, and 60% say they have used a bank for financial advice (men 69% and 53% respectively) 60% say they understand financial language and 70% are interested in learning more (men 68% and 66% respectively) 79% say they understand all or most of the information in financial statements (men 80%) 84% say that for financial information and advice they would consider using a financial advisor, 65% a bank, 48% a community service and 33% Centrelink (men 80%, 55%, 36% and 25% respectively)

Financial literacy


3.

What women think about money Ability and understanding Women are generally highly confident in their ability with money, especially when it comes to everyday money management issues like budgeting, saving, dealing with credit and managing debt. They’re less confident when it comes to more complex issues like investing, understanding financial language and ensuring enough money for retirement, and with these issues they’re also less confident than men. 91% of women say they have the ability to budget (men 90%) 88% of women say they have the ability to save (men 88%) 85% of women say they have the ability to understand their rights and responsibilities when dealing with money (men 86%) 83% of women say they have the ability to deal with credit cards (men 84%) 88% of women say they have the ability to manage debt (men 90%) 77% of women say they have the ability to plan for their long-term financial future (men 84%) 63% of women say they have the ability to invest money (men 75%) 60% of women say they understand financial language (men 68%) 60% of women say they have the ability to ensure enough money for retirement (men 65%)

Recognition of the importance of learning Women think it’s important to learn more about more complex money management issues such as planning for the financial future, understanding rights and responsibilities when dealing with money and ensuring enough money for retirement. They’re less interested in learning more about everyday money management issues, consistent with their higher levels of confidence in these areas. Recognition of the importance of learning more is generally similar for women and men, but relative to their ability, women are more interested in learning about planning for the future, investing, understanding financial language and ensuring enough money for retirement. 78% of women are interested in learning more about planning for their long-term financial future (men 77%) 74% are interested in learning more about understanding their rights and responsibilities when dealing with money (men 73%) 72% are interested in learning more about ensuring enough money for retirement (men 70%) 70% are interested in learning more about understanding financial language (men 66%) 68% are interested in learning more about investing money (men 71%) 57% are interested in learning more about budgeting (men 57%) 66% are interested in learning more about saving (men 64%) 49% are interested in learning more about dealing with credit cards (men 49%) 61% are interested in learning more about managing debt (men 61%)

4.

Attitudes and beliefs Significant numbers of women hold attitudes and beliefs that can get in the way of them managing their money better – from thinking it doesn’t matter to finding it stressful, uncomfortable or boring. Women are more likely than men to find money stressful, uncomfortable or boring and less likely to feel in control of their financial situation, but they’re less likely to take a short term view or be dismissive of money. 52% say that dealing with money is stressful and overwhelming (men 43%) 42% say that thinking too much about their long-term financial future makes them uncomfortable (men 37%) 34% say dealing with money is boring (men 29%) 23% say nothing I do will make a big difference to my financial situation (men 19%) 29% say financially, they like to live for today (men 34%) 52% of women believe that money is just a means to buy things (men 59%)

Financial literacy


5.

Some observations A picture of women’s attitudes to money and actual money management behaviour is revealed from the findings of this report. While some parts of the picture are consistent, there are also some apparent inconsistencies. Importantly, all findings give insights into the mix of attitudes, beliefs and behaviours that must be addressed if financial literacy initiatives directed at women are to succeed.

Ability, understanding and recognition of the importance of learning more about money management issues Budgeting

91

57 83

Dealing with credit cards

49 88

Managing debt

61 88

Saving

66 87

Recognising a scam

68

Choosing appropriate insurance

81

65

84

Getting information about money

69 81

Dealing with financial service providers

67

Understanding rights and responsibilities

85

74 77 78

Planning for the financial future 63

Investing

68

Understanding financial language

60

Ensuring enough money for retirement

60

70 72

% of women aged 18 years and older Ability and understanding

6.

Importance of learning more

•• In the Financial literacy – Australians understanding money report, ‘operational’ confidence in dealing with money issues was defined as the gap between self-assessed ability to deal with a particular issue and recognition of the importance of learning. The same measure is used in this report. On this basis, confidence levels for women are higher for less complex or frequently encountered money management issues like budgeting, dealing with credit cards, managing debt and saving, and lower for more complex and less frequently encountered issues such as investing, understanding financial language and ensuring enough money for retirement. The concept of ‘operational’ confidence is discussed further in Chapter 3. •• While, at the least, a majority of women are confident in their ability in all 13 money management issues, some do not have good money management habits, particularly in areas where they are relatively less confident in ability, such as investing, but also in areas of high confidence in ability where recognition of the importance of learning is relatively low, such as dealing with credit cards. •• The tendency for money behaviour to be at odds with self-assessed ability may be explained in a variety of ways. An ability to prepare a budget or commit to a regular savings plan doesn’t necessarily lead to budgeting or saving on a regular basis. –– Procrastination can be a factor. As with most money issues, there may be little or no adverse short term consequences in someone, for example, recognising that they should put a budget or savings plan in place, having the capacity to do so, but putting it off until later. •• For issues where operational confidence is high but significant proportions of women reported behaviour that could not be said to be financially literate, there may be attitudes at play which impede either awareness of the need to learn, or the progression from awareness to learning and action. For these women, a lack of technical ability does not appear to be the issue so much as the learning and action having a perceived lack of relevance and importance. –– The survey reveals a range of money attitudes and beliefs that are inimical to people investing the time and effort required in taking the steps to improve their money skills and behaviour. As the survey indicates, stress and discomfort, boredom and disinterest, and personal relevance and procrastination, are commonly held attitudes when it comes to money. For those concerned with delivering financial literacy services and resources to women there is much to be drawn from this report. A key consideration to emerge relates to the practicalities of building pathways to effective engagement with money issues – of putting appropriate emphasis on motivation in design and delivery strategies by promoting the personal relevance of better money management, and the prospect of the greater choices and opportunities, security and other quality of life benefits that better money skills can provide. There is no shortage of quality resources already available to those with an active interest in building their money skills. The challenge is to promote engagement and motivation to those who, for reasons of disinterest in the issue, lack of perceived relevance, stress or the other obstacles identified in this report, are not currently seeking to build their money skills. In many ways, the broad observations about women’s money management ability, behaviour and attitudes are similar to those noted for the whole adult population in Financial literacy – Australians understanding money. While there are many similarities between women and men when it comes to managing and thinking about money, there are also some notable differences. These are discussed in Chapters 2 and 3, and detailed in Appendix 2.

Financial literacy


7.

Chapter 1: Introduction The Survey in context Financial literacy is an issue of growing public policy significance internationally. In recent years, Organisation for Economic Cooperation and Development countries such as the United Kingdom, the United States, Australia and New Zealand have taken decisive action at the government level to provide avenues for consumers to build their money skills, recognising that consumers of financial services, and thus the effective operation of financial services markets, face a range of challenges. By giving individuals the opportunity to take advantage of increased competition and choice in financial services, financial literacy can yield positive, tangible and lasting results for individuals, families and the broader community. The benefits include greater personal independence, wellbeing and improved economic prosperity. Businesses benefit from improved staff welfare and consequential improvements in productivity. The financial services market will also operate more efficiently when consumers are better informed and more confident in exercising the choices available to them. The Financial Literacy Foundation (the Foundation) aims to assist all Australians to increase their financial knowledge and better manage their money (see Appendix 4 for more information on the role of the Foundation). As part of its work, the Foundation commissioned DBM Consultants to survey a total of 7,500 Australians aged 12 to 75 to gain a better understanding of our attitudes to money: how confident we are and how we behave when it comes to managing our money. The sample consisted of 6,947 adults aged 18 to 75 and 553 youths aged 12 to 17 years. In proportion to their natural incidence in the population, the sample included people from non-English speaking backgrounds, Indigenous Australians and Australians living in rural locations. The final sample was weighted for age, gender and geographic distribution by state and territory, using the Australian Bureau of Statistics 2001 census data. See Appendix 3 for more information on the survey methodology. The survey represents a unique contribution to the body of international financial literacy research, as well as to research on financial literacy in Australia. It is designed to complement other Australian surveys that aim to provide an objective measure of competency in financial matters, and to contribute to a broader understanding of financial literacy in Australia by examining respondents’ self-assessed ability, understanding, attitudes and behaviour in regard to using and managing money.

8.

Survey and report overview The Foundation’s research report, Financial literacy – Australians understanding money, identified some significant differences between the behaviour of women and men when it comes to managing and thinking about money (see Appendix 1 for a summary of the report’s findings). This report builds on those findings, examining these differences in greater detail and providing a more complete picture of the attitudes and behaviours of women with respect to managing money. Of the 7,500 people surveyed, 4,138 were women over the age of 18. It is the findings for this group that form the basis of this report. The significant sample size has allowed the data for women to be broken down by both age and household income: a level of detail not included in the earlier report. A consolidated set of the data for women is provided at Appendix 2. This report is similar in structure to that of the Financial literacy – Australians understanding money report. Following this introductory chapter, Chapter 2 sets out women’s responses to a series of questions regarding their attitudes to money and money management behaviour across seven money topics and 13 corresponding money management issues. Topic

Money management issues

Budgeting

Budgeting

Saving

Saving

Investing

Investing

Credit and debt

Dealing with credit cards Managing debt


Planning for the long-term financial future Ensuring enough money for retirement

Protecting money

Choosing appropriate insurance Understanding rights and responsibilities Recognising a scam


Understanding financial language Dealing with financial service providers Getting information about money

Chapter 3 examines the relationship between women’s self-assessed ability and understanding and other elements of their survey responses, including how they put their money management skills into practice. This chapter also examines survey responses to nine specified attitudes about money and the impact that these have on behaviour. The report concludes with a series of appendices covering: •• a summary of findings from the Financial literacy – Australians understanding money report (Appendix 1); •• the survey findings for women, broken down by age and household income (Appendix 2); •• the survey methodology (Appendix 3); and •• information about the Financial Literacy Foundation (Appendix 4).

Financial literacy


9.

Chapter 2: How women manage money In this Chapter, other than where indicated, differences between the genders have been included in the comparative charts and associated discussion only where they are statistically significant at the 95% confidence level.

Budgeting Women are highly confident in their ability to budget, but around a half say that they don’t budget regularly. While women report better budgeting habits than men, they are less likely to think they’d get by in a financial emergency. Budgeting is a simple activity that helps people to track their income and expenses. The benefits of using a budget to put savings to good use and increase broader money management skills can help people achieve financial goals that have significant and lasting value. Most women are highly confident in their ability to budget (91%), the highest of any issue covered by the survey. Consistent with high reported confidence levels, only around half of all women recognise the importance of learning more about budgeting (57%), the second lowest for the issues covered by the survey. Most women consider that they are easily able to keep track of their everyday spending (82%) and think about ways to reduce spending (80%). In addition, most women say that they could get by for some time in case of a financial emergency (77%), and a majority consider that they would not have problems setting money aside for big purchases or spending (69%). Despite women’s high levels of confidence in their ability, and generally reporting good budgeting habits, around half report that they do not budget regularly for their day-to-day finances (44%).

Budgeting – women’s attitudes and behaviour 82

Able to keep track of spending

80

Think about ways to reduce spending 77

Could get by in a financial emergency Don’t have problems setting money aside for big purchases Don’t budget regularly

69 44 % of women aged 18 years and older

10.

Differences between genders Women generally report better budgeting habits than men. Women and men report similar levels of ability and understanding with budgeting day-to-day finances, but women are much more likely than men to regularly do a budget for their day-to-day finances and more likely to think about ways to reduce their spending. Despite this, women feel less comfortable about their financial position than men, with fewer reporting that they could get by for some time in case of a financial emergency.

Budgeting – differences between genders 91

Budgeting - ability

90

80

Think about ways to reduce spending

Don’t budget regularly

78

44 52

77

Could get by in a financial emergency

82 % of respondents aged 18 years and older Women

Men

Financial literacy


11.

Saving Women are highly confident in their ability to save and the majority of women say they have good savings habits, but one in five say they don’t save. Women and men report similar attitudes and behaviours when it comes to saving but women are more likely to say they save before they spend. The key to successful saving is to start early, no matter how small the savings. Through successful saving, people are more likely to have an improved ability to cope with unexpected expenses or financial emergencies. They can also experience less stress and uncertainty regarding their ability to meet their financial needs, particularly as they progress towards meeting their financial goals. Most women are highly confident in their ability to save (88%), the second highest of the issues covered by the survey. In addition, the majority of women recognise the importance of learning more about saving (66%). Most women say that they have a special savings account used just for savings (73%), save regularly (62%), and agree that the best way to save money is to save a small amount regularly, starting young (75%). When it comes to the manner of saving, women are more likely to say they save before they spend (52%), and less likely to spend before they save (42%). However, many women say that they don’t save (22%).

Saving – women’s attitudes and behaviour 73

Have a dedicated savings account

62

Save regularly

75

Agree best way to save is to save regularly, starting young

52

Save before spending

42

Spend before saving

Don't save

22 % of women aged 18 years and older

12.

Differences between genders While the behaviour of women and men is fairly similar when it comes to saving, women are more likely than men to report that they save before they spend and more likely to recognise the importance of learning more about saving.

Saving – differences between genders 52 Save before spending 48

66 Saving - interest in learning 64 % of respondents aged 18 years and older Women

Men

Financial literacy


13.

Investing Compared to budgeting and saving, fewer women are confident in their ability to invest, but the majority are interested in learning more. Women are also less confident than men when it comes to investing, and are less likely to take factors such as risk and return into consideration when making an investment decision. Investing means making money work harder, and investments don’t have to be big to be worthwhile. Investing is one way that people can make the most of their savings. For many people, successful investing is the key to security and choice during their working lives and retirement. Compared to budgeting and saving, fewer women are confident in their ability to invest (63%) – the third lowest reported level of ability. While the majority of women recognise the importance of learning more about investing (68%), this rate is relatively low compared to the reported level of ability. The majority of women say that they own or are currently paying off the home they live in (64%). Some women own or are currently paying off an investment property (16%), and just under a half say that they have other investments (43%). A number of findings are consistent with a relative lack of confidence in investing. Less than a third of women would consider risk and return when making an investment decision (30%), and few would consider background information such as the reputation of the company (5%) and diversification (5%). However, the majority of women recognise that the risks and returns of an investment are unpredictable (67%).

Investing – women’s attitudes and behaviour 64

Own or paying off home

Have investment property

16

43

Have other investments

Consider risk and return when making an investment

30

Agree that risks and returns are unpredictable


14.

Differences between genders Compared to men, women reported that they are less confident in their ability to invest and less likely to engage in investing, outside home ownership. When it comes to holding investments, women are more likely than men to report that they own or are currently paying off the home they live in. However, women are less likely than men to report that they own or are currently paying off an investment property, and much less likely to have other investments. Women are much less likely than men to say that they would consider risk and return when making an investment decision. However, women are more likely than men to recognise that the risks and returns of an investment are unpredictable.

Investing – differences between genders 64

Own or paying off home Have investment property

60 16 20 43

Have other investments

49 63

Investing - ability

75 68

Investing - interest in learning Consider risk and return when making an investment

71 30 38 67

Agree that risks and returns are unpredictable


Financial literacy

Men


15.

Credit and debt Women are highly confident in their ability to deal with credit cards and manage debt. Most women say they can manage debt, but some say they only make minimum repayments on credit card debt and loans and that they get into debt by buying things they can’t afford. Women are less likely than men to say that they have credit cards and loans and more likely to have other sources of debt. Women are also less likely to feel comfortable with their level of debt. Credit cards can be effective and convenient tools, and loans can be an essential part of achieving longer term goals such as buying a home, but their costs, including repayments and fees and charges, should be understood and affordable. Most women are highly confident in their ability to manage debt (88%) and deal with credit cards (83%). While the majority of women recognise the importance of learning more about managing debt (61%), only around a half do so when it comes to dealing with credit cards (49%). Most women say that they have a credit card (71%), and regularly pay the total balance on their credit card when it is due (74%). However, some women say they typically only make the minimum repayment on their credit card (14%). Most women also say that they won’t buy things that they can’t afford (76%), and that they feel comfortable with their level of debt (77%). Most women agreed that there is no better way of saving money than paying off debt early (86%). Around half of women say they have loans including mortgages, car loans and investment loans (55%), and many women report having other debts, such as hire purchases and loans for tertiary education (23%). Most women say that they usually make more than minimum repayments on their loans (80%).

Credit and debt – women’s attitudes and behaviour Have a credit card

71

Pay total credit card balance when due Only make minimum repayment on credit card

74 14 76

Won't buy things I can't afford Comfortable with level of debt

77

No better way of saving than paying off debt early

86

Have loan Have other debt

55 23

Make more than minimum repayment on loan


16.

Differences between genders Women are less likely than men to report that they have the ability and understanding to manage debt, and more likely to report that they are uncomfortable with their level of debt. Women are also less likely than men to report that they have a credit card and much less likely to pay the total balance owing on it when due. Women are more likely to report that they have debts other than loans and credit cards. Women are more likely than men to say that there is no better way of saving money than paying off debt early.

Credit and debt – differences between genders 86

No better way of saving than paying off debt early

83 88 90

Managing debt - ability

Uncomfortable with level of debt

18 15 23

Have other debt

21 71

Have a credit card

Don't pay total credit card balance when due

73 23 18 % of respondents aged 18 years and older Women

Men

Financial literacy


17.

Planning and retirement Compared to budgeting, saving, dealing with credit cards and managing debt, women are less confident in their ability to plan for their long-term financial future and ensure enough money for retirement. Women are also less confident than men when it comes to planning for their long-term financial future and ensuring enough money for retirement, but they are interested in learning more about planning for their financial future, including in retirement. Planning is the best way to achieve security in the long term and in retirement, and the earlier people put their plan into action, the more choices they will have. The advantage of starting young is that savings can grow steadily over time. While most women are confident in their ability to plan for their long-term financial future (77%), this is also the issue where the greatest proportion of women recognise the importance of learning more (78%). Women reported relatively low levels of ability with respect to ensuring enough money for their retirement (60%) – the second lowest level of ability reported by women. However, most women recognise the importance of learning more about ensuring enough money for retirement (72%), which is consistent with the relatively low level of reported ability. Most women agree that financial planning is not only important for those who have a lot of money (83%), while the majority disagree that retirement is too far away to think about (64%), and have personally thought about their long-term financial plans for the future and retirement (74%). Most women have a superannuation fund (78%) but do not think employer funded superannuation will be sufficient for retirement (73%). Most do not believe the age pension will be sufficient (86%).

Planning and retirement – women’s attitudes and behaviour Financial planning is not only for those with a lot of money Retirement is not too far away to think about

83 64 74

Have thought about long-term financial plans

78

Have a superannuation fund 73

Employer funded superannuation will not be sufficient for retirement

86

The age pension will not be sufficient for retirement % of women aged 18 years and older

18.

Differences between genders Women are much less likely than men to say they have the ability and understanding to ensure they will have enough money for their retirement, and to plan for their long-term financial future. However, women are more likely than men to recognise the importance of learning more about ensuring they have enough money for their retirement. They are also more likely to recognise that financial planning is not just important for those who have a lot of money. However, despite women being more likely to recognise the importance of these issues, men are more likely than women to say that they have personally thought about long-term financial plans for the future and retirement. Women are much less likely than men to say they have a superannuation fund. Consistent with the lower rates of superannuation coverage among females, women are also less likely than men to say that employer funded superannuation will be enough to cover their retirement needs.

Planning and retirement – differences between genders 78

Have a superannuation fund

Employer funded super will be enough for my retirement

84 12 16 60

Ensure enough money for retirement - ability

65 77

Plan for long-term future - ability

84 72 70

Ensure enough money for retirement - learning

83

Financial planning is not just for those with a lot of money

81 74

Have thought about financial future and retirement


Financial literacy

Men


19.

Protecting money Women are highly confident in their ability to protect their money, including through choosing appropriate insurance, understanding rights and responsibilities when dealing with money, and recognising a scam. However, fewer women are confident in their ability to invest and the findings indicate that the majority wouldn’t take key considerations into account when making an investment decision, so they may be more vulnerable to scams than they think. Women and men report similar attitudes and behaviour when it comes to protecting money. Protecting money means protecting people, their assets and income for security and peace of mind – but there’s more to protecting money than buying insurance. It also means understanding the risks of an investment decision, spreading risk by not putting all your eggs in one basket, and being wary of scams. If an investment opportunity seems too good to be true, it probably is. Most women are confident in their ability to choose appropriate insurance (81%), and the majority recognise the importance of learning more (65%). However, choosing insurance only ranks eighth for women in terms of ability and understanding, while ranking tenth in terms of recognising the importance of learning. Most women hold some form of insurance (87%), and believe in taking out insurance to be prepared for the unexpected (84%). Most women are confident in their ability to understand their rights and responsibilities when dealing with money (85%) and recognise the importance of learning more (74%), the second highest learning response for money management issues covered by the survey. Most women are confident in their ability to recognise an investment scam (87%), and the majority recognise the importance of learning more (68%). However, less than a third of women would consider risk and return when making an investment decision (30%), and very few would consider background information such as the reputation of the company (5%) and diversification (5%).

Protecting money – women’s attitudes and behaviour Have insurance

87

Believe in taking out insurance to be prepared for the unexpected Consider risk and return when making an investment

84


20.

Differences between genders When it comes to protecting money, the reported attitudes and behaviours of women and men are fairly similar. However, women are more likely than men to report that they believe in taking out insurance to be prepared for the unexpected, and less likely than men to say they have the ability and understanding to recognise a scam.

Protecting money – differences between genders 84

Believe in taking out insurance to be prepared for the unexpected

79

87 Recognising a scam - ability

89

% of respondents aged 18 years and older Women

Men

Financial literacy


21.

Information and advice Women are highly confident in their ability to get information about money with a majority having sought financial information or advice from an accountant/tax agent or a bank, and just over a half from a financial adviser. Fewer women are confident in their ability to understand financial language, consistent with their level of confidence in ability to invest and ensure enough money for retirement, and most are interested in learning more. Women and men report similar abilities in obtaining information about money and dealing with financial service providers but there are substantial differences in their preferred sources of information or advice. Women are more likely than men to consider getting information and advice from financial advisors, banks, community services and government sources. Collecting and understanding information is essential to good money management, and sometimes it’s important to get help. Information and advice are often thought of in relation to investment and taxation issues, but they can relate to anything from doing a budget to getting debt under control and understanding rights and responsibilities. Most women are confident in their ability to get information about money (84%), and the majority recognise the importance of learning more (69%). Most women are confident in their ability to deal with banks or other financial service providers (81%), and the majority recognise the importance of learning more (67%). Compared to other money management issues, fewer women are confident in their ability to understand financial language (60%), in fact, this is the lowest reported level of ability for any money management issue covered by the survey. However, the majority of women recognise the importance of learning more (70%). Most women say they spend a lot of time thinking about financial information before making a financial decision (74%). This contrasts with the findings regarding investing, where relatively low proportions of women would consider key issues before making an investment decision. Most women say they read their financial statements regularly (94%), and the majority read them every time (64%). Most women say that they understand all or most of the information in their financial statements (79%).

Information and advice – women’s attitudes and behaviour Spend a lot of time thinking about information before making a decision

74

94

Read financial statements regularly Understand all or most of the information in financial statements


22.

Differences between genders Women are much less likely than men to report they have the ability to understand financial language, but are more likely to recognise the importance of learning more. Women are more likely than men to say that they spend a lot of time thinking about financial information before making a financial decision. Women are less likely than men to report that they have used an accountant or tax agent for financial information or advice, but are much more likely to report that they have used a bank for these services.

Information and advice – differences between genders 60

Understanding financial language - ability

68 70

Understanding financial language - learning

66 74

Spend a lot of time thinking about information before making a decision

72 66

Have used an accountant/tax agent for financial information or advice

69 60

Have used a bank for financial information or advice


Men

There are some substantial differences between women and men when it comes to preferred sources of information and advice. Women are more likely than men to report that they would use formal sources such as financial advisers, banks, and face-to-face sources such as community services and Centrelink. Women are less likely than men to say that they would use informal sources such as work and friends, and print and electronic sources such as newspapers, magazines and the internet.

Financial literacy


23.

Where people say they would seek financial information or advice (some of the gender differences may not be significant at the 95% confidence level) 84

Financial adviser

80

Accountant/tax agent

81 81 65

Bank

55 63 63

Family 53

Friends

57 51

Seminars/ educational institutions

54 50 49

Government website

48

Community services

36 47

Internet website

50 44

Newspapers

50 44

Business/money related magazines Centrelink Work TV/radio

51

33 25 32 41 30 32 % of respondents aged 18 years and older Women

Men

While women report they are most likely to consider using financial advisers, then accountants and tax agents for financial information and advice, their actual behaviour does not reflect this. The majority of women say that they have actually seen an accountant/tax agent (66%) or a bank (60%), but only around half say that they have seen a financial adviser (54%).

24.

Conclusion The findings of this Chapter indicate that: •• Although women are generally confident in their ability to manage money, some do not have good management habits, both for issues where confidence in ability is high, such as budgeting, saving, and dealing with credit cards, and for issues where confidence in ability is relatively low, such as investing. For example: –– around a half report that they don’t regularly budget for day-to-day expenses; –– around a fifth report that they are not easily able to keep track of everyday spending, could not get by for some time in case of a financial emergency, or do not think about ways to reduce their spending; –– around a fifth don’t save; –– around a fifth would get into debt buying something they can’t afford; –– around a quarter don’t pay the total balance owing on their credit card when it is due; and –– less than a third would consider both risk and return when making an investment decision. •• While women’s reported confidence in their ability to manage money is generally high, confidence is higher for day-to-day money management issues than it is for more complex and less frequently encountered issues. –– Confidence in ability is over 70% for all money management issues except investing (63%), ensuring enough money for retirement (60%), and understanding financial language (60%). •• The main inconsistency in women’s reported confidence in their ability relates to recognising scams. Women are highly confident in their ability to recognise scams, but relatively less confident when it comes to investing and understanding financial language. Combined with relatively low levels of recognition of some important aspects of investing which are also key to recognising scams, overall levels of confidence in recognising scams may not be well founded. This may, in turn, indicate a higher degree of vulnerability to scams. •• In general terms, the findings indicate that women and men have similar day-to-day money management behaviour, but apart from budgeting, women are less confident in ability than men, particularly in relation to the more complex issues. Women also tend to be less comfortable with their financial situation and more conservative in their behaviour. For example: –– although women are much more likely than men to report that they regularly budget for day-to-day finances and more likely to think about ways to reduce spending, they are less likely to report that they could get by in case of a financial emergency; –– women are slightly more likely4 than men to report that they have a separate account that is used just for savings, and more likely to save before they spend; –– women are more likely to invest in the home they live in but less likely to invest in investment properties; –– women are much less likely than men to have investments such as shares, bonds, managed funds, debentures and unit trusts; –– while women are more likely than men to agree that the risks and returns of an investment are unpredictable they are also much less likely to consider risk and return when making an investment decision; –– women are less likely than men to report that they have credit cards and loans but more likely to report that they have other types of debt such as school fees, hire purchase and higher education loans; 4

But not significant at the 95% confidence level

Financial literacy


25.

–– women are more likely than men to believe that there is no better way of saving than paying off debt early, but less likely to report that they pay the total amount owing on a credit card; –– women are more likely than men to feel uncomfortable with their level of debt; –– women are much less likely than men to have a superannuation fund and much less likely to report that they have the ability to plan for their long-term future and ensure enough money for retirement; –– women are less likely to have personally thought about long-term financial plans for the future and for retirement, even though they are much more likely to recognise the importance of planning ahead when they start work; –– women are slightly more likely5 than men to report that they have insurance and much more likely to report that they believe in taking out insurance to be prepared for the unexpected; –– women are less likely than men to report that they have the ability to recognise a scam or investment scheme that seems too good to be true, consistent with lower levels of confidence in their ability to invest and understand financial language; –– women are more likely than men to spend a lot of timing thinking about financial information before making a financial decision; –– women are much more likely than men to consider using financial advisers, banks, community services and Centrelink for financial information or advice; –– women are much more likely than men to have actually used a bank for financial information or advice and less likely to have actually used a financial adviser; and –– women are much less likely than men to consider using newspapers, business and money magazines and the workplace as sources of financial information or advice.

5

26.

But not significant at the 95% confidence level

Chapter 3: What women think about money Introduction This Chapter examines the issue of confidence using the relationship between respondents’ self‑reported levels of ability and understanding, and recognition of the importance of learning more as an indicator of confidence for each of the 13 money management issues covered by the survey.6 It also examines the attitudes and behaviours that can adversely affect financial literacy by: •• preventing people from being aware of financial literacy issues; •• impeding financial literacy learning and education; and •• preventing knowledge and understanding from being translated into actual behaviour. Attitudes and behaviours interact in complex, overlapping and mutually reinforcing ways, often depending on the individual’s stage of life and their particular personal and financial circumstances. Due to this complexity and interdependence, it is not easy to understand how one functions in complete isolation from others. What people think and feel about money issues impacts upon how receptive they are to learning about money. Overcoming and managing these attitudes is an important part of improving people’s ability and willingness to engage with their money in an informed way. Combined with any difficulties people experience in assessing their true level of ability and understanding about money issues, they can have beliefs and emotions that affect their self‑assessment of ability and understanding, and their progress towards a particular financial outcome.

6

In Chapter 2, confidence is discussed in terms of respondents’ self-reported ability for each of the 13 money management issues.

Financial literacy


27.

ability and understanding For day-to-day money management issues where women are more likely to have regular and direct experience, their self-assessed level of ability and understanding is higher. Conversely, where the issues are less frequently encountered and/or require more specialised knowledge, such as investing, ensuring enough money in retirement and understanding financial language, the self-assessed level of ability and understanding is lower. Additionally, women generally reported lower levels of ability than men across the 13 money management issues, with a larger gap for the more complex issues.

Ability and understanding about money matters I have the ability and understanding in … 91 90

Budgeting

88 88

Saving

88 90

Managing debt

87 89

Recognising a scam Understanding rights and responsibilities

85 86


84 85 83 84

Dealing with credit cards Choosing appropriate insurance

81 82


81 82 77

Planning for the financial future 63

Investing 60


60


75

65 68


28.

Men

84

Differences between genders Levels of reported ability are generally lower for women than they are for men, however the differences are statistically significant at the 95% confidence level for seven of the 13 money management issues. Women are more likely than men to report that they have the ability and understanding to budget day-to-day finances. Women are less likely than men to report that they have the ability and understanding to: •• manage debt; •• recognise an investment scam; •• invest; •• plan for the long-term financial future; •• ensure enough money for retirement; and •• understand financial language. It is worth noting that while women generally report lower levels of ability than men, this may indicate a more conservative approach to self-assessment of ability rather than a lower level of actual ability.

Financial literacy


29.

Learning Consistent with their reported levels of ability, women attribute greater importance to learning more about relatively complex money management issues that can have significant financial consequences, such as planning for retirement and the long-term financial future, understanding rights and responsibilities when dealing with money, investing and recognising scams. Learning more about day-to-day money management issues such as budgeting, dealing with credit cards and managing debt, is regarded as less important. Additionally, women generally reported higher levels of recognition of the importance of learning more about money management issues than did men.

Importance of learning more about money matters At this point in life it is important to learn more about … 78 77

Planning for the financial future 74 73


72 70


70


66


69 67

Recognising a scam

68 69 68

Investing

67


65 66 64

Saving

65 63

Choosing appropriate insurance 61 61

Managing debt

57 57

Budgeting 49 49



30.

Men

71

Differences between genders While women are generally more likely than men to recognise the importance of learning more about money management issues, the differences are not as large as they are in the case of reported levels of ability. The differences are statistically significant at the 95% confidence level for four issues. Women are more likely than men to recognise the importance of learning more about: •• saving; •• ensuring enough money for retirement; and •• understanding financial language. Women are less likely than men to recognise the importance of learning more about investing. This is of interest in that women are much less likely than men to say that they have the ability and understanding to invest.

confidence Confidence in money management is not a bad thing, since it is important that people have the confidence to take financial actions in anticipation of a positive result. However, overconfidence in ability and understanding of money matters can mean that mistakes are made and opportunities missed. A substantial academic literature in cognitive psychology makes the case that people are usually overconfident and, in particular, they are overconfident about the precision of their knowledge.7 In general, people tend to overestimate their ability to do well at tasks, are unrealistically optimistic about future events, and have unrealistically positive self-evaluations. International financial literacy research suggests overconfidence regarding financial knowledge and understanding is a significant issue that impacts upon both the degree to which people seek financial information and advice, and the financial decisions that they subsequently make.8 A 2005 OECD report discusses research across 12 countries that found that respondents felt they knew more about financial matters than was actually the case.9 This was particularly clear in research which combined objective tests (that measured knowledge and understanding of financial terms and ability to apply financial concepts to particular situations), with self-assessment (respondents’ perceptions of their financial understanding and knowledge).10 ‘Respondents in the US, UK, and Australia felt confident in their knowledge of financial issues even though when given a test on basic finance it is clear they had only a limited understanding of these issues. If consumers do not realise they need information, they will not be in a position to seek it.’ 11 Overconfidence reduces demand for financial education and the degree to which people seek financial information and advice. In this study, most respondents reported that they spend ‘a lot of time’ thinking about financial 7 8

See T Odean, Volume, Volatility, Price and Profit when all Traders are Above Average, Graduate School of Management, University of California Davis, United States of America, draft April 1998. For an overview of overconfidence in relation to financial literacy research, see A Lusardi and O Mitchell, Financial Literacy and Retirement Preparedness: Evidence and implications for financial education programs, Michigan Retirement Research Centre, Working paper 2006-144, November 2006, p. 8.

9 10 11

OECD, Improving Financial Literacy: Analysis of Issues and Policies, OECD Publishing, Paris, France, 2005, pp. 43‑44. For example, ANZ Survey of Adult Financial Literacy in Australia, conducted by ACNielsen Research, Melbourne, November 2005. OECD, op. cit., pp. 43-44. In the 2005 ANZ survey of financial literacy, 67% of respondents said that they understood the principle of compound interest, but only 28% were rated with a ‘good level’ of comprehension when they solved an actual problem.

Financial literacy


31.

information before making a decision, and most reported that they try to stay informed about money matters. However, some people will consider themselves to be informed when they are not, regardless of whether they have spent a lot of time thinking about financial information before making a decision. If they are overconfident, they may overestimate the effectiveness of spending a lot of time and being informed, and remain unaware of their overconfidence and the adverse impact it may have on how they manage their money. ‘The fact that consumers feel more confident than their actual financial knowledge warrants, suggests that an important aspect of financial education programs is increasing consumers’ awareness of their need for financial information. If consumers are not aware they need financial information, they will not seek it out. Thus policymakers need to think about the best ways to reach these consumers and convince them that they need financial education.’ 12 Using the relationship between respondents’ self‑reported levels of ability and understanding, and recognition of the importance of learning more, as an indicator of confidence assumes that, generally speaking, people who say they have the ability and understanding regarding a particular money management issue are more confident in dealing with that issue than those who say they do not. Conversely, those who recognise the importance of learning more about a particular money management issue are less likely to be confident in dealing with that issue than those who do not. A proxy measure for overall confidence is derived by comparing reported levels of ability and understanding with reported levels of recognition of the importance of learning more. The gap indicates the relative levels of confidence between different money management issues, with a positive gap indicating a relatively higher level of confidence and a smaller or negative gap indicating a lower level of confidence. As with all measures of selfreported confidence, this measure does not indicate that confidence is necessarily well founded in terms of ability, understanding and practice. The table below presents the relative confidence levels across the 13 money management issues for women and men, with higher numbers being indicative of higher confidence levels.

relative levels of confidence – women and men Topic (Highest to lowest level of confidence)

Women’s confidence %

Men’s confidence %

Budgeting

34.0

32.4


33.2

34.4

Managing debt

27.2

28.7

Saving

22.0

24.1

Recognising a scam

18.3

20.3

Choosing appropriate insurance

16.4

18.6


15.5

18.0

Dealing with financial services providers

13.5

16.7


10.7

12.6

Planning for the financial future

-0.9

7.2

Investing

-5.6

3.7


-10.4

1.5


-11.6

-4.4

12

32.

OECD, op. cit., p. 45.

For the purposes of this discussion: •• large positive gaps (above 20%) indicate high levels of confidence; •• gaps of between 10% and 20% indicate more moderate levels of confidence; and •• small (less than 10%) or negative gaps indicate relatively low levels of confidence. A positive gap is evident for issues where levels of exposure and familiarity with particular money management issues are high, and where people are more likely to have a sense of control regarding processes and outcomes. It is also evident that the gap is smaller or negative in areas of greater complexity, greater uncertainty regarding processes and outcomes, and where third parties are involved in transactions. The findings indicate that: •• Although relative levels of overall confidence vary between women and men, with the exception of budgeting and dealing with credit cards, the 13 money management issues are ranked identically for women and men. •• The differences between women and men increase with increasing complexity of the issue. Differences are generally less than 2% for the money management issues where confidence is high, generally between 2% and 3% for the money management issues where confidence is more moderate, and much greater (7% to 12%) for the money management issues where confidence is relatively low. •• With the exception of budgeting, women have lower levels of overall confidence than men. •• For women, there are four money management issues where reported recognition of the importance of learning more is greater than reported ability and understanding, ie. the gap between the two measures is negative. These four issues: planning for the financial future; investing; understanding financial language; and ensuring enough money for retirement, represent a logical grouping. That is, understanding financial language is integral to investing and investing is integral to both planning for the financial future and ensuring enough money for retirement. •• For men, the gap between the two measures is negative for only one issue: ensuring enough money for retirement, although men’s overall level of confidence is also relatively low for planning for the financial future, investing and understanding financial language.

Financial literacy


33.

Attitudes and behaviours What people think and feel about money issues impacts upon how receptive they are to learning more about money. Some attitudes can be widely held and have a relatively low impact on financial literacy, while others can be narrowly held and have a relatively large impact. Overcoming and managing these attitudes is an important part of improving ability and willingness to engage with money in an informed way. Respondents were asked to assess their level of agreement with nine statements that could be characterised as contributing to poor or suboptimal financial outcomes.

Attitudes to money I agree that… 52

Money is just a means to buy things

59 52

Dealing with money is stressful and overwhelming

43 42

Thinking too much about my long-term financial future makes me feel uncomfortable

37 38

Money is (not) important to be happy in life

35 29

Financially, I like to live for today

34 34

Dealing with money is boring

29 21

I (do not) spend a lot of time thinking about financial information before I make a decision

23 23

Nothing I do will make a big difference to my financial situation I (do not) try to stay informed about money matters and finances

19 16 15


Men

Differences between genders The differences are statistically significant at the 95% confidence level in relation to seven attitudes. Women are more likely than men to believe that: •• dealing with money is stressful and overwhelming; •• thinking too much about the long-term financial future causes discomfort; •• money is (not) important to be happy in life; •• dealing with money is boring; and •• nothing they do will make a big difference to their financial situation.

34.

Women are less likely than men to believe that: •• money is just a means to buy things; and •• financially, they like to live for today. The remainder of this Chapter examines each of these attitudes and the strength of their relationship with 20 behaviours that could not be said to be financially literate. The 20 selected behaviours have been drawn from the seven money topics covered in Chapter 2: Budgeting

I am not easily able to keep track of my everyday spending I do not think about ways to reduce my spending I have problems setting money aside for big purchases or spending I do not regularly do a budget for day-to-day finances

Saving

I did not save any money in the last six months I save only when I want something big or special I do not save

Investing

I would not consider risk and return when making an investment decision

Credit and debt

I tend to fall behind on loan repayments I usually only pay the minimum amount owing on credit cards I do not feel comfortable with my level of debt I do not regularly pay the total balance owing on my credit card when it is due


I believe that financial planning is only important for those who have a lot of money I believe that retirement is too far away to think about I have not thought about long-term financial plans for the future and retirement

Protecting money

I do not believe in taking out insurance to be prepared for the unexpected I do not have insurance


I rarely or never read financial statements I check only the balance on financial statements I understand only some or none of the information in financial statements

The charts that follow compare the proportion of women and men who report behaviours that could not be said to be financially literate, with the proportion of respondents (women and men respectively) who report that they hold a particular attitude. For example, as discussed in the next section of this chapter, women who believe that money is not important to be happy in life are more likely than all female respondents to believe that retirement is too far away to think about. However, men who believe that money is not important to be happy in life are not more likely than all male respondents to believe that retirement is too far away to think about. The nine attitudes have been presented in ascending order of association with the incidence of behaviours. For the purposes of the discussion: •• attitudes that impact on seven or less behaviours have been assessed as having a relatively minor impact on behaviour; •• attitudes that impact on between eight and 13 behaviours have been assessed as having a moderate impact on behaviour; and •• attitudes that impact on 14 or more behaviours have been assessed as having a relatively large impact on behaviour. The impact of attitudes on behaviour is determined in part by whether there is sufficient motivation for the individual to make a behavioural change and, in effect, overcome the barriers that stop them engaging with money. Chapter 4 of the Financial literacy – Australians understanding money report discusses motivation and building ability in some detail, and how self-efficacy can help to overcome attitudinal barriers. In the following commentaries, all comparisons are significant at the 95% confidence level.

Financial literacy


35.

Money is (not) important to be happy in life While it is true that money can’t buy happiness, good money management can make a big difference to people’s lives and therefore their happiness, especially over time. Women are more likely than men to say that money is not important to be happy in life (38%/35%). The proportion of women holding this attitude generally increases with age and decreases with household income. Women who say that money is not important to be happy in life are more likely than women overall to exhibit only one of the 20 behaviours that are not indicative of financially literate behaviour. Compared to the other attitudes, holding this attitude has the smallest impact on behaviour. For women, this attitude impacts on only one behaviour, which is related to planning and retirement.

Differences between genders Women who hold this attitude are more likely than women overall to believe that retirement is too far away to think about. For men, this is not the case.

36.

40 x 170mm 50% Column Width

Impact of attitudes on behaviour – Money is not important to be happy in life Tend to fall behind on loan repayments Didn’t save any money in the last 6 months Rarely or never read financial statements Don’t believe in taking out insurance to be prepared for the unexpected Check only the balance on financial statements Don’t have insurance Usually only pay the minimum amount owing on credit cards Save only when wanting something big or special Believe financial planning is only important for those who have a lot of money Not easily able to keep track of everyday spending Don’t think about ways to reduce spending Don’t feel comfortable with level of debt Believe retirement is too far away to think about Understand only some or none of the information in financial statements Don’t save Don’t regularly pay the total balance owing on credit cards when due Have not thought about long-term financial plans for the future and retirement Have problems setting money aside for big purchases or spending Don’t regularly do a budget for day-to-day finances Would not consider risk and return when investing 40%

20%

20 20

Women Overall Hold attitude


80%

0088

40 40

60%

0066

60 60

40%

0044

Financial literacy

20%

0022

Men Overall Hold attitude

0%

00

60%

00

80 80

80%

37.

Money is just a means to buy things Holding this attitude can reflect a lack of appreciation or understanding of how money can be made to work and assist in achieving goals. In this sense, money is not just a means to buy things, but a way to achieve broader life goals such as security and peace of mind, as well as more specific goals which may have significant and lasting value. People who agree that money is just a means to buy things may miss significant opportunities to improve their financial wellbeing. Women are much less likely than men to say that money is just a means to buy things (52%/59%). The proportion of women holding this attitude generally decreases with age and decreases with household income. Women who say that money is just a means to buy things are more likely than women overall to exhibit three of the 20 behaviours that are not indicative of financially literate behaviour. Compared to the other attitudes, holding this attitude has a relatively minor impact on behaviour. For women, this attitude impacts on all three behaviours which relate to planning and retirement. For this group of people, there may not be a full appreciation of money’s capacity to assist in achieving more significant long-term goals.

Differences between genders For those holding this attitude, there were no differences in behaviour between the genders.

38.


Impact of attitudes on behaviour – money is just a means to buy things Tend to fall behind on loan repayments Didn’t save any money in the last 6 months Rarely or never read financial statements Don’t believe in taking out insurance to be prepared for the unexpected Check only the balance on financial statements Don’t have insurance Usually only pay the minimum amount owing on credit cards Save only when wanting something big or special Believe financial planning is only important for those who have a lot of money Not easily able to keep track of everyday spending Don’t think about ways to reduce spending Don’t feel comfortable with level of debt Believe retirement is too far away to think about Understand only some or none of the information in financial statements Don’t save Don’t regularly pay the total balance owing on credit cards when due Have not thought about long-term financial plans for the future and retirement Have problems setting money aside for big purchases or spending Don’t regularly do a budget for day-to-day finances Would not consider risk and return when investing 40%

20%

20 20



80%

0088

40 40

60%

0066

60 60

40%

0044

Financial literacy

20%

0022


0%

00

60%

00

80 80

80%

39.

Nothing I do will make a big difference to my financial situation This is a unique attitude in that the sense of powerlessness it indicates may prevent any kind of engagement with money. Differences may not be perceived as big if they have low monetary value, or little or no immediate impact. However, differences, including little ones, may have significant meaning or value, especially over time, and therefore doing something like managing money well on a day-to-day basis, will make a big difference. Women are more likely than men to say that nothing they do will make a big difference to their financial situation (23%/19%). The proportion of women holding this attitude increases with age and decreases with household income. Women who say that nothing they do will make a big difference to their financial situation are more likely than women overall to exhibit 11 of the 20 behaviours that are not indicative of financially literate behaviour, especially three of them. Relative to the other attitudes, holding this attitude has a moderate impact on behaviour. Women who hold this attitude are far more likely than women overall to believe that financial planning is only important for those with a lot of money (34%/15%), to not save (36%/22%), and to not have thought about long-term financial plans for their future and retirement (38%/26%). For women, this attitude impacts on 11 behaviours: three relating to planning and retirement, two relating to budgeting, two to credit and debt, one to saving, one to investing, one to information and advice, and one to protecting money.

Differences between genders Women who hold this attitude are more likely than women overall to say they tend to fall behind on their loan repayments, and that they understand only some or none of the information in financial statements. For men, this is not the case.

40.


Impact of attitudes on behaviour – Nothing I do will make a difference Tend to fall behind on loan repayments Didn’t save any money in the last 6 months Rarely or never read financial statements Don’t believe in taking out insurance to be prepared for the unexpected Check only the balance on financial statements Don’t have insurance Usually only pay the minimum amount owing on credit cards Save only when wanting something big or special Believe financial planning is only important for those who have a lot of money Not easily able to keep track of everyday spending Don’t think about ways to reduce spending Don’t feel comfortable with level of debt Believe retirement is too far away to think about Understand only some or none of the information in financial statements Don’t save Don’t regularly pay the total balance owing on credit cards when due Have not thought about long-term financial plans for the future and retirement Have problems setting money aside for big purchases or spending Don’t regularly do a budget for day-to-day finances Would not consider risk and return when investing 40%

20%

20 20

60%


80%

0088

40 40

40%

0066

60 60

20%


0044

Financial literacy

0%

0022


00

60%

00

80 80

80%

41.

Dealing with money is boring If people find money boring then no matter how important they acknowledge it to be, they may struggle to actually engage with it. Women are more likely than men to say that dealing with money is boring (34%/29%). The proportion of women holding this attitude is fairly consistent across age groups and household income levels. Women who say that dealing with money is boring are more likely than women overall to exhibit 12 of the 20 behaviours that are not indicative of financially literate behaviour. Relative to the other attitudes, holding this attitude has a moderate impact on behaviour. For women, this attitude impacts on 12 behaviours: four relating to budgeting, three relating to planning and retirement, three to information and advice, one to investing, and one to credit and debt.

Differences between genders Women who hold this attitude are more likely than women overall to say they usually only pay the minimum amount owing on credit cards, that they don’t think about ways to reduce their spending, and that they would not consider risk and return when making an investment decision. For men, this is not the case. Men who hold this attitude are more likely than men overall to say they save only when they want something big or special, that they don’t feel comfortable with their level of debt, and that they don’t save. For women, this is not the case.

42.


Impact of attitudes on behaviour – Dealing with money is boring Tend to fall behind on loan repayments Didn’t save any money in the last 6 months Rarely or never read financial statements Don’t believe in taking out insurance to be prepared for the unexpected Check only the balance on financial statements Don’t have insurance Usually only pay the minimum amount owing on credit cards Save only when wanting something big or special Believe financial planning is only important for those who have a lot of money Not easily able to keep track of everyday spending Don’t think about ways to reduce spending Don’t feel comfortable with level of debt Believe retirement is too far away to think about Understand only some or none of the information in financial statements Don’t save Don’t regularly pay the total balance owing on credit cards when due Have not thought about long-term financial plans for the future and retirement Have problems setting money aside for big purchases or spending Don’t regularly do a budget for day-to-day finances Would not consider risk and return when investing 40%

20%

20 20



80%

0088

40 40

60%

0066

60 60

40%

0044

Financial literacy

20%

0022


0%

00

60%

00

80 80

80%

43.

Thinking too much about my long-term financial future makes me feel uncomfortable This attitude is specifically focused on thinking about money rather than dealing with money and therefore relates to the process of understanding money issues, rather than engaging with them. Women are much more likely than men to say that thinking too much about their long-term financial future makes them feel uncomfortable (42%/37%). The proportion of women holding this attitude decreases with both age and household income. Women who say that thinking too much about the future makes them uncomfortable are more likely than women overall to exhibit 12 of the 20 behaviours that are not indicative of financially literate behaviour, especially two of them. Relative to the other attitudes, holding this attitude has a moderate impact on behaviour. Women who hold this attitude are far more likely than women overall to believe that retirement is too far away to think about (31%/20%), and have problems setting money aside for big purchases or spending (41%/28%). For women, this attitude impacts on 12 behaviours: three relating to planning and retirement, three relating to credit and debt, two to budgeting, two to information and advice, one to protecting money and one to saving.

Differences between genders Women who hold this attitude are more likely than women overall to say that they do not have insurance. For men, this is not the case. Men who hold this attitude are more likely than men overall to say they rarely or never read financial statements, that they save only when they want something big or special, and that they would not consider risk and return when making an investment decision. For women, this is not the case.

44.


Impact of attitudes on behaviour – THINKING ABOUT MY Financial future makes me uncomfortable Tend to fall behind on loan repayments Didn’t save any money in the last 6 months Rarely or never read financial statements Don’t believe in taking out insurance to be prepared for the unexpected Check only the balance on financial statements Don’t have insurance Usually only pay the minimum amount owing on credit cards Save only when wanting something big or special Believe financial planning is only important for those who have a lot of money Not easily able to keep track of everyday spending Don’t think about ways to reduce spending Don’t feel comfortable with level of debt Believe retirement is too far away to think about Understand only some or none of the information in financial statements Don’t save Don’t regularly pay the total balance owing on credit cards when due Have not thought about long-term financial plans for the future and retirement Have problems setting money aside for big purchases or spending Don’t regularly do a budget for day-to-day finances Would not consider risk and return when investing 40%

20%

20 20



80%

0088

40 40

60%

0066

60 60

40%

0044

Financial literacy

20%

0022


0%

00

60%

00

80 80

80%

45.

Dealing with money is stressful and overwhelming Even relatively simple tasks such as paying bills and finding money for unexpected expenses can be stressful at times and if a number of these issues coincide, the experience can become overwhelming. When more complex tasks such as buying a house or making a big investment decision are taken into account, then it is even easier to appreciate why some people believe that dealing with money is stressful and overwhelming. Women are much more likely than men to say that dealing with money is stressful and overwhelming (52%/43%). The proportion of women holding this attitude decreases with both age and household income. Women who say that money is stressful and overwhelming are more likely than women overall to exhibit 15 of the 20 behaviours that are not indicative of financially literate behaviour, especially one of them. Compared to the other attitudes, holding this attitude has a relatively large impact on behaviour. Women who hold this attitude are far more likely than women overall to say they have problems setting money aside for big purchases or spending (39%/28%). For women, this attitude impacts on 15 behaviours: three relating to planning and retirement, three relating to budgeting, three to credit and debt, two to saving, two to information and advice, one to investing and one to protecting money.

Differences between genders Women who hold this attitude are more likely than women overall to say that they do not have insurance. For men, this is not the case. Men who hold this attitude are more likely than men overall to say they save only when they want something big or special. For women, this is not the case.

46.


Impact of attitudes on behaviour – Money is stressful and overwhelming Tend to fall behind on loan repayments Didn’t save any money in the last 6 months Rarely or never read financial statements Don’t believe in taking out insurance to be prepared for the unexpected Check only the balance on financial statements Don’t have insurance Usually only pay the minimum amount owing on credit cards Save only when wanting something big or special Believe financial planning is only important for those who have a lot of money Not easily able to keep track of everyday spending Don’t think about ways to reduce spending Don’t feel comfortable with level of debt Believe retirement is too far away to think about Understand only some or none of the information in financial statements Don’t save Don’t regularly pay the total balance owing on credit cards when due Have not thought about long-term financial plans for the future and retirement Have problems setting money aside for big purchases or spending Don’t regularly do a budget for day-to-day finances Would not consider risk and return when investing 40%

20%

20 20



80%

0088

40 40

60%

0066

60 60

40%

0044

Financial literacy

20%

0022


0%

00

60%

00

80 80

80%

47.

I (do not) spend a lot of time thinking about financial information before I make a financial decision This behaviour is at odds with good money management in that it indicates that financial decisions are made without sufficient thought or planning. For most people and in a commonsense way, not spending enough time thinking about financial information before making a decision is not financially literate behaviour. This behaviour is reported by 21% of women, with women and men having roughly the same likelihood of holding this attitude. The proportion of women holding this attitude generally decreases with household income but is not related to age. Women who say that they do not spend a lot of time thinking about financial information before making a financial decision are more likely than women overall to exhibit 17 of the 20 behaviours that are not indicative of financially literate behaviour, especially four of them. Compared to the other attitudes, holding this attitude has a relatively large impact on behaviour. Women who hold this attitude are far more likely than women overall to not think about ways to reduce their spending (27%/16%), to believe that retirement is too far away to think about (33%/20%), to not have thought about their long-term financial plans for their future and retirement (39%/26%), and to not regularly do a budget (58%/44%). For women, this attitude impacts on all behaviours except one relating to saving, and two relating to credit and debt.

Differences between genders Women who hold this attitude are more likely than women overall to say they usually only pay the minimum amount owing on credit cards, and that they do not regularly pay the total balance owing on their credit card when it is due. For men, this is not the case.

48.


Impact of attitudes on behaviour – I do not spend a lot of time thinking about financial information before making a decision Tend to fall behind on loan repayments Didn’t save any money in the last 6 months Rarely or never read financial statements Don’t believe in taking out insurance to be prepared for the unexpected Check only the balance on financial statements Don’t have insurance Usually only pay the minimum amount owing on credit cards Save only when wanting something big or special Believe financial planning is only important for those who have a lot of money Not easily able to keep track of everyday spending Don’t think about ways to reduce spending Don’t feel comfortable with level of debt Believe retirement is too far away to think about Understand only some or none of the information in financial statements Don’t save Don’t regularly pay the total balance owing on credit cards when due Have not thought about long-term financial plans for the future and retirement Have problems setting money aside for big purchases or spending Don’t regularly do a budget for day-to-day finances Would not consider risk and return when investing 40%

20%

20 20



80%

0088

40 40

60%

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60 60

40%

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Financial literacy

20%

0022


0%

00

60%

00

80 80

80%

49.

Financially, I like to live for today Of all the attitudes, this is probably the one which is most obviously at odds with good money management, the benefits of which increase with sensible, longer-term approaches. For most people, paying no attention to the financial future has serious risks and consequences, and can translate as an aversion to informed financial decision making, including financial planning. Women are much less likely than men to say that financially, they like to live for today (29%/34%). The proportion of women holding this attitude generally decreases with age and decreases with household income. Women who say that financially they like to live for today are more likely than women overall to exhibit 17 of the 20 behaviours that are not indicative of financially literate behaviour, especially five of them. Compared to the other attitudes, holding this attitude has a relatively large impact on behaviour. Women who hold this attitude are far more likely than women overall to say they usually only pay the minimum amount owing on their credit card (24%/14%), to believe that financial planning is only important for those with a lot of money (25%/15%), to believe that retirement is too far away to think about (40%/20%), to not have thought about their long-term financial plans for their future and retirement (40%/26%), and to have problems setting money aside for big purchases or spending (40%/28%). For women, this attitude impacts on all behaviours except one relating to saving, one relating to credit and debt and one relating to budgeting.

Differences between genders Women who hold this attitude are more likely than women overall to say they don’t feel comfortable with their level of debt, and that they don’t regularly do a budget. For men, this is not the case. Men who hold this attitude are more likely than men overall to say they tend to fall behind on their loan repayments. For women, this is not the case.

50.


Impact of attitudes on behaviour – Financially, I like to live for today Tend to fall behind on loan repayments Didn’t save any money in the last 6 months Rarely or never read financial statements Don’t believe in taking out insurance to be prepared for the unexpected Check only the balance on financial statements Don’t have insurance Usually only pay the minimum amount owing on credit cards Save only when wanting something big or special Believe financial planning is only important for those who have a lot of money Not easily able to keep track of everyday spending Don’t think about ways to reduce spending Don’t feel comfortable with level of debt Believe retirement is too far away to think about Understand only some or none of the information in financial statements Don’t save Don’t regularly pay the total balance owing on credit cards when due Have not thought about long-term financial plans for the future and retirement Have problems setting money aside for big purchases or spending Don’t regularly do a budget for day-to-day finances Would not consider risk and return when investing 40%

20%

20 20



80%

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60 60

40%

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Financial literacy

20%

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0%

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00

80 80

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51.

I (do not) try to stay informed about money matters and finances People will have different definitions of what constitutes trying to stay informed, and what one person considers to be trying, another person may consider to be not trying at all. Furthermore, some people will think they are sufficiently informed while in fact there are gaps in their understanding of money matters and finances. They will not be aware of this fact but will, when asked, respond that they try to stay informed. Nonetheless, most Australian adults recognise that trying to stay informed is the right thing to do. This behaviour is reported by 16% of women, with women and men having roughly the same likelihood of holding this attitude. The proportion of women holding this attitude generally decreases with both age and household income. Women who say that they do not try to stay informed about money matters and finances are more likely than women overall to exhibit 18 of the 20 behaviours that are not indicative of financially literate behaviour, especially four of them. Compared to the other attitudes, holding this attitude has the largest impact on behaviour. Women who hold this attitude are far more likely than women overall to say they are not easily able to keep track of their everyday spending (26%/16%), to believe that retirement is too far away to think about (36%/20%), to not have thought about their long-term financial plans for their future and retirement (46%/26%), and to not regularly do a budget (57%/44%). For women, this attitude impacts on all behaviours except one relating to saving and one relating to credit and debt.

Differences between genders Women who hold this attitude are more likely than women overall to say they usually only pay the minimum amount owing on their credit cards. For men, this is not the case.

52.


Impact of attitudes on behaviour – I do not try to stay informed Tend to fall behind on loan repayments Didn’t save any money in the last 6 months Rarely or never read financial statements Don’t believe in taking out insurance to be prepared for the unexpected Check only the balance on financial statements Don’t have insurance Usually only pay the minimum amount owing on credit cards Save only when wanting something big or special Believe financial planning is only important for those who have a lot of money Not easily able to keep track of everyday spending Don’t think about ways to reduce spending Don’t feel comfortable with level of debt Believe retirement is too far away to think about Understand only some or none of the information in financial statements Don’t save Don’t regularly pay the total balance owing on credit cards when due Have not thought about long-term financial plans for the future and retirement Have problems setting money aside for big purchases or spending Don’t regularly do a budget for day-to-day finances Would not consider risk and return when investing 40%

20%

20 20



80%

0088

40 40

60%

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60 60

40%

0044

Financial literacy

20%

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0%

00

60%

00

80 80

80%

53.

CONCLUSION For issues where overall confidence is high but significant proportions of respondents reported behaviour that could not be said to be financially literate, there may be attitudes at play which impede either awareness of the need to learn, or the progression from awareness to learning and action. For these people, a lack of technical ability does not appear to be the issue so much as the learning and action having a perceived lack of relevance and importance. •• See the conclusion of Chapter 2 for examples where confidence in ability is high, but a significant proportion of respondents reported behaviour that could not be said to be financially literate. For women (and men), the four issues where overall confidence is relatively low, and implicitly, recognition of the importance of learning is relatively high (planning for the financial future, investing, understanding financial language and ensuring enough money for retirement), represent the areas of greatest self-identified need. While recognition of the importance of learning is a positive outcome and an essential prerequisite for taking action, and ultimately increasing levels of confidence and engagement, it does not guarantee that a person will actually engage in the learning process. For these people, a lack of awareness is not the issue, but there may be attitudes at play which prevent the person from actually learning and taking action. For women (and men), there is a range of attitudes that are associated with particular behaviours that could not be said to be financially literate, ie. certain attitudes are likely to have a causal relationship with particular behaviours. These attitudes impact on behaviour to varying degrees. •• ‘Money is not important to be happy in life’ and ‘Money is just a means to buy things’ have a relatively minor impact on behaviour. –– These two attitudes often reflect moral or philosophical positions in relation to money. •• ‘Nothing I do will make a big difference to my financial situation’, ‘Dealing with money is boring’, and ‘Thinking too much about my long-term financial future makes me feel uncomfortable’ are likely to have a moderate impact on behaviour. –– At least half the behaviours tested were more likely to be reported by women holding any of these three attitudes. •• ‘Dealing with money is stressful and overwhelming’, ‘I do not spend a lot of time thinking about financial information before I make a financial decision’, ‘Financially, I like to live for today’ and ‘I do not try to stay informed about money matters and finance’ have a relatively large impact on behaviour. –– At least three quarters of the behaviours tested were more likely to be reported by women holding any of these four attitudes. There are some interesting anomalies in the findings, where an attitude impacts on a group of behaviours but does not impact on another behaviour which is very closely linked. For example: •• Compared to women in general, women who believe that dealing with money is boring are more likely to say that they do not regularly do a budget, that they have problems setting money aside for big purchases or spending, that they don’t think about ways to reduce their spending and that they are not able to keep track of their spending. However, despite being more likely to report all of these behaviours, they are not more likely to say that they don’t save. •• Compared to women in general, women who say they do not spend a lot of time thinking about financial information before making a decision are more likely to say they do not pay the total balance owing on their credit card when it is due, and that they usually only pay the minimum amount owing on their credit cards. However, despite being more likely to report these other behaviours, they are not more likely to say that they feel uncomfortable with their level of debt.

54.

The number of statistically significant matches, at the 95% confidence level, between at least one behaviour under a money topic and an attitude was: •• Planning and retirement – associates with nine attitudes; •• Budgeting – associates with seven attitudes; •• Credit and debt – associates with seven attitudes; •• Information and advice – associates with seven attitudes; •• Saving – associates with six attitudes; •• Investing – associates with six attitudes; and •• Protecting money – associates with six attitudes.

RELATIONSHIP BETWEEN money topic AND ATTITUDE Planning and retirement

Budgeting

Credit and debt Information and advice

Saving

Investing

Protecting money

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Money is not important to be happy in life

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Nothing I do will make a big difference to my financial situation

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

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

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Thinking too much about my long‑term financial future makes me feel uncomfortable

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

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











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I do not spend a lot of time thinking about financial information before I make a financial decision

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









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









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I do not try to stay informed about money matters and finances



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









Financial literacy


55.

Overall, the attitudes tested by the survey have the greatest impact on behaviours relating to planning and retirement. With the exception of ‘Money is not important to be happy in life’, women who hold any of the nine attitudes tested in the survey are more likely to exhibit all three negative behaviours relating to planning and retirement, ie: •• ‘I have not though about long-term financial plans for my future and my retirement’; •• ‘Retirement is too far away for me to think about’; and •• ‘Financial planning is only important for those who have a lot of money’. As noted earlier in this Chapter, planning for the financial future and ensuring enough money for retirement are two of the four issues where women have relatively low levels of overall confidence.

56.

APPENDIX 1: FINANCIAL LITERACY – AUSTRALIANS UNDERSTANDING MONEY – SUMMARY OF FINDINGS Confidence and the importance of learning •• In broad terms, self-reported ability decreases with complexity and recognition of the importance of learning increases with complexity, which is both logical and encouraging in terms of awareness of gaps in knowledge and the need to learn. •• Australians say they have generally high levels of ability with their money, especially when it comes to everyday money management issues, such as budgeting, saving, dealing with credit and managing debt, and are less confident when it comes to more complex money issues that they deal with less frequently, such as investing and planning for retirement. 90% of adults say they have the ability to budget 88% say they have the ability to save 83% say they have the ability to deal with credit cards 89% say they can manage debt 69% say they have the ability to invest money 63% say they can ensure they have enough money for retirement •• Australians recognise the importance of learning more about the more complex money management issues where their confidence is lacking, such as investing and ensuring enough money for retirement. This is an extremely positive and encouraging result, and is consistent with the finding that many adults intend, in the next 12 months, to make improvements in the way they manage their money. Australians are less interested in learning about everyday money management issues, consistent with their higher levels of confidence in these areas. 70% of adults are interested in learning more about how to invest money 71% are interested in learning more about ensuring enough money for retirement 77% are interested in learning more about planning for their long-term future 74% are interested in learning more about understanding their rights and responsibilities 57% are interested in learning more about budgeting 49% are interested in learning more about dealing with credit cards •• Overall, Australians have generally high levels of confidence in their ability, and in most cases people say they manage their money well. However, some people do not have good money management habits, particularly in areas where they are less confident, such as investing, but also in areas where recognition of the importance of learning is relatively low, such as budgeting, saving, dealing with credit cards and managing debt. •• The report highlights areas where there is a divergence between what people believe to be a good money habit and what they do in practice. For instance, respondents had moderately high levels of confidence in their ability to recognise a scam, yet around two thirds would not consider both risk and return when making an investment decision.

Financial literacy


57.

Attitudes and beliefs •• The report highlights some of the negative views that may hold people back from achieving their goals. Respondents were asked to assess their level of agreement with ten attitudes towards money that can contribute to poor financial outcomes. •• The findings are significant, with at least 55% of the adult population having one or more attitudes, beliefs or behaviours that can stop them engaging with money. •• Commonly held attitudes and beliefs regarding money - from thinking it doesn’t matter or isn’t important, to finding it stressful, boring or too hard - may adversely affect financial literacy, regardless of whether people are confident in their ability to manage money, ie. ability does not necessarily translate into practice. •• What people think and feel about money issues impacts upon how receptive they are to learning about money. Overcoming and managing these attitudes is an important part of improving people’s ability and willingness to engage with their money. 55% of adults believe that money is just a means to buy things 48% say that dealing with money is stressful and overwhelming 40% say that thinking about their long-term financial future makes them uncomfortable 36% say money is not important to be happy in life 31% say financially, they like to live for today 31% say dealing with money is boring

Intentions Many Australians intend to make improvements to the way they manage their money but some don’t, mainly because they’re happy with their current arrangements. 40% of adults intend to make improvements in the way they manage their money in the next 12 months 16% don’t intend to make improvements in the way they manage their money in the next 12 months, either because they are happy with their current arrangements (81%), they are not interested (9%) or they haven’t thought about it (7%)

Self-efficacy •• A person’s beliefs about their own capability to achieve outcomes are reflected by their self‑efficacy. Developing self‑efficacy is an effective way to overcome many of the attitudinal barriers to managing money better. •• The lesson from self‑efficacy may be that the best program for financial literacy is one that gets people started as soon as possible with an achievable goal, while being enough of a challenge to build confidence. Self‑efficacy gains can then be achieved from the experience of having accomplished the goal. •• If each goal helps to build a strong foundation in both understanding money and engaging with money matters, then a person should be able to embark upon a process whereby each success reinforces behaviour and provides additional motivation for the next step.

58.

Young people and money Young people are less confident than adults when it comes to managing money, reflecting their relative lack of experience. However, they’re reasonably well informed about good money habits, even if they don’t always put them into practice, and they’re keen to learn more. 72% of young people say that saving a small amount regularly from a young age is the best way to save money, but only 50% of youth say that they save regularly 61% would not consider return and 77% would not consider risk when choosing an investment 44% say they have the ability to deal with credit cards, compared to 83% of adults 67% agree that retirement is too far away to think about, compared to 21% of adults 48% spend a lot of time thinking about financial information before making a financial decision, compared to 73% of adults 59% say that financially, they like to live for today, compared to 31% of adults 70% to 90% want to learn more about money issues

Topics Budgeting Australians are highly confident in their ability to budget, but for many people it’s an informal affair and around half the adult population say they don’t budget regularly. 90% of adults say they have the ability to budget 48% say they do not budget regularly for their day-to-day finances 27% say they have difficulty setting money aside for big purchases or spending 17% say they could not get by for some time in case of a financial emergency

Saving Australians are highly confident in their ability to save and the majority of people say they have good savings habits, but a fifth of adults say they don’t save. 88% of adults say they have the ability to save 62% say that they save regularly 43% say they spend first and save second 22% say they don’t save

Investing Compared to budgeting and saving, fewer Australians are confident in their ability to invest and the findings indicate that many wouldn’t take key considerations into account before making an investment decision, but they’re interested in learning more. 69% of adults say they have the ability to invest money 70% are interested in learning more about investing money 18% say they have an investment property and 46% say they have other investments 66% would not consider both risk and return when choosing an investment

Financial literacy


59.

Credit and debt Australians are highly confident in their ability to deal with credit cards and manage debt. Most people say they manage debt wisely, but some say they make only minimum repayments and others say they get into debt by buying things they can’t afford. 89% of adults say they can manage debt and 83% feel confident with credit cards 76% say that they regularly pay the total balance owing on their credit card when it is due 17% usually only make the minimum repayment on loans and 13% do the same with credit cards 21% say that they will use debt to buy things they can’t afford

Planning and retirement Australians are highly confident in their ability to plan for their long-term financial future. Fewer are confident in their ability to ensure enough money for retirement, but they’re interested in learning more about how their money can give them the choice and flexibility they’re looking for. 81% of adults say they have the ability to plan for their long-term future 63% say they have the ability to ensure enough money for retirement 86% do not believe that the age pension will be sufficient for retirement, and 73% say employer funded superannuation will not meet their retirement needs 77% are interested in learning more about planning for their long-term future

Protecting money Australians are highly confident in their ability to protect their money, including choosing appropriate insurance, understanding rights and responsibilities when dealing with money and recognising a scam or an investment scheme that seems too good to be true. However, fewer are confident in their ability to invest and the findings indicate that many wouldn’t take key considerations into account when making an investment decision, so they may be more vulnerable to scams than they think. 82% of adults say they have the ability to choose appropriate insurance 85% say they understand their rights and responsibilities when dealing with money 88% say they can recognise a scam or an investment scheme that seems too good to be true 69% say they have the ability to invest money 66% would not consider both risk and return when choosing an investment

Information and advice Australians are highly confident in their ability to get information about money and around two thirds say they have sought financial advice, usually about a tax or investment issue. Fewer are confident in their ability to understand financial language, and this is consistent with them saying they’re less confident in their ability to invest and ensure enough money for retirement, but they’re interested in learning more. 85% of adults say they have the ability to get information about money 81% say they have the ability to deal with financial services providers 68% say they have used an accountant/tax agent 64% say they understand financial language and 68% are interested in learning more 20% say they understand some or none of the information in financial statements

60.

Appendix 2: findings13, 14 Women - Age Total Men Attitudes, beliefs and barriers

Women

18-29

30-44

45-54

55-64

>64

Women - Household income (thousands) $100

Dealing with money is stressful and overwhelming Total agree

47.7%

42.9%

52.3%

60.5%

55.0%

51.4%

45.3%

37.2%

57.2%

56.2%

54.1%

45.7%

Thinking too much about my long-term financial future makes me feel uncomfortable Total agree

39.5%

37.4%

41.7%

45.1%

44.1%

43.9%

36.1%

30.0%

45.8%

42.0%

41.1%

32.3%

Total disagree

53.6%

56.1%

51.1%

44.5%

48.9%

51.7%

58.2%

62.1%

44.5%

51.1%

52.5%

62.8%

28.9%

33.8%

32.4%

33.5%

38.2%

31.3%

33.2%

37.0%

30.5%

32.2%

35.4%

51.7%

52.9%

51.8%

52.4%

49.5%

50.2%

57.0%

56.1%

49.3%

48.1%

37.6%

34.3%

37.6%

36.9%

41.7%

40.4%

46.3%

42.0%

36.7%

32.3%

28.6%

40.5%

25.7%

25.9%

21.8%

25.6%

33.4%

28.4%

26.2%

22.5%

Dealing with money is boring Total agree

31.4%

Money is just a means to buy things Total agree

55.1%

58.5%

Money is important to be happy in life Total disagree

36.3%

35.0%

Financially, I like to live for today Total agree

31.3%

34.1%

I spend a lot of time thinking about financial information before I make a (financial) decision Total disagree

22.0%

22.6%

21.3%

23.1%

17.8%

21.1%

21.0%

29.0%

26.1%

21.4%

17.6%

19.9%

16.1%

12.7%

13.0%

12.4%

15.4%

15.7%

14.6%

14.4%

21.3%

35.7%

53.6%

49.0%

29.6%

17.3%

8.3%

92.8%

92.9%

95.9%

88.5%

91.0%

92.3%

92.8%

I try to stay informed about money matters and finances Total disagree

15.4%

15.0%

15.8%

21.1%

Nothing I do will make a big difference to my financial situation Total agree

20.8%

18.7%

22.8%

13.0%

15.2%

Budgeting

I have the ability and understanding to budget day-to-day finances Total agree

90.4%

89.5%

91.4%

86.0%

92.2%

At this point in your life, is it important for you to learn more about how to budget day-to-day finances? Yes

57.3%

57.1%

57.4%

78.6%

57.5%

49.3%

47.0%

39.7%

59.8%

61.5%

61.1%

52.1%

79.9%

86.1%

87.6%

95.0%

82.6%

83.5%

81.0%

82.6%

I am easily able to keep track of my everyday spending Total agree

13 14

81.8%

81.9%

81.8%

71.1%

Where the difference in responses between the genders was statistically significant at the 95% confidence level, the response percentages have been bolded. Please note that around one sixth of respondents did not indicate their household income. This group has not been included in the household income section of the tabulated data.

Financial literacy


61.

Women - Age Total

Men

Women

18-29

30-44

45-54

55-64

>64


I think about ways to reduce my spending Total agree

79.1%

77.7%

80.4%

85.2%

86.0%

77.8%

72.6%

67.4%

75.9%

81.8%

82.7%

79.8%

I have problems with setting money aside for big purchases or spending Total agree

26.7%

25.8%

27.6%

31.0%

28.5%

28.2%

25.6%

19.6%

37.6%

30.3%

26.1%

18.0%

Total disagree

69.5%

70.1%

68.9%

64.9%

68.1%

68.5%

71.8%

77.1%

59.9%

66.6%

70.1%

79.8%

I could get by for some time in case of a financial emergency (such as an illness, divorce) Total agree

79.4%

Total disagree

16.8%

81.8% 15.0%

77.0%

70.0%

76.0%

78.9%

81.8%

86.0%

67.7%

72.6%

77.8%

89.4%

18.6%

24.1%

19.9%

17.1%

15.6%

9.8%

25.6%

23.1%

18.1%

8.6%

I regularly do a budget for my day-to-day finances Total agree

48.1%

43.5%

52.6%

51.8%

54.3%

51.2%

52.1%

51.7%

62.5%

55.9%

52.0%

47.0%

Total disagree

47.6%

51.8%

43.5%

43.6%

41.9%

43.9%

44.6%

46.1%

34.1%

41.6%

43.9%

47.3%

80.0%

70.8%

73.1%

71.4%

65.0%

74.2%

69.4%

75.3%

72.7%

89.7%

87.4%

88.9%

92.8%

81.9%

85.6%

89.6%

92.8%

41.9%

61.0%

68.3%

71.6%

61.1%

55.5% 29.5%

52.1% 33.2%

53.9% 28.2%

65.0% 18.8%

73.1% 13.4%

Saving

Do you have a savings account? (just for savings) Yes

72.1%

71.4%

72.8%

I have the ability and understanding to save money Total agree

88.3%

88.2%

88.4%

84.9%

At this point in your life, is it important for you to learn more about how to save money? Yes

65.3%

64.1%

66.4%

85.3%

68.2%

60.1%

58.2%

Thinking about savings, which of the following statements best applies to you? Save regularly Don’t save

62.4% 21.5%

63.1% 21.0%

61.7% 22.2%

60.1% 19.0%

61.6% 22.0%

62.9% 23.9%

67.9% 19.2%

Which of the following best describes how you saved money in the last 6 months? Saved first, spent after Spent first, saved leftovers

49.9%

47.9%

51.8%

51.4%

52.4%

53.4%

52.0%

47.0%

40.0%

46.7%

51.7%

54.8%

43.0%

44.3%

41.8%

43.6%

40.6%

40.8%

39.2%

46.9%

50.9%

46.4%

40.6%

40.4%

Which of the following, do you think, would provide you with the most money? Would it be... Saving a small amount regularly, starting young Investing

74.7%

74.1%

75.3%

70.4%

78.0%

74.1%

80.5%

73.3%

74.6%

78.4%

78.2%

73.1%

77.8%

80.5%

81.6%

63.2%

66.6%

72.4%

75.3%

26.2%

18.9%

9.5%

7.0%

10.1%

20.8%

31.0%

28.3%

37.7%

45.3%

61.5%

Do you own or are you currently paying off the home you live in? Yes

62.0%

60.2%

63.9%

25.6%

69.9%

Do you own or are you currently paying off investment property? Yes

18.1%

20.0%

16.1%

4.9%

19.0%

Do you have investments? (such as shares, bonds, managed funds, debentures, unit trusts) Yes

62.

46.1%

49.2%

42.9%

18.6%

44.1%

51.1%

57.0%

59.3%

Women - Age Total

Men

Women 18-29

30-44

45-54

55-64

>64


63.6%

70.6%

66.7%

65.8%

50.6%

63.5%

63.2%

72.4%

I have the ability and understanding to invest money Total agree

68.8%

74.8%

62.8%

51.6%

At this point in your life, is it important for you to learn more about how to invest money? Yes

69.7%

71.1%

68.4%

80.5%

73.7%

69.3%

56.8%

39.0%

44.6%

63.8%

77.1%

75.8%

66.2%

70.6%

70.7%

74.9%

71.7%

72.7%

70.8%

59.1%

The risks or returns of an investment are unpredictable Total agree

65.3%

63.3%

67.2%

61.0%

Imagine you had some money to invest. What would you consider in choosing an investment? Risk

49.3%

51.7%

46.9%

47.8%

49.7%

43.8%

45.9%

43.1%

43.6%

46.5%

47.9%

51.5%

Return

55.2%

58.5%

52.0%

56.2%

57.4%

52.8%

44.6%

34.6%

38.0%

49.9%

58.4%

59.3%

Risk and Return

34.1%

38.0%

30.3%

32.8%

34.9%

28.1%

26.5%

20.1%

20.9%

27.2%

33.9%

35.7%

Type of investment

30.1%

30.9%

29.4%

23.5%

28.5%

36.5%

32.4%

28.4%

26.7%

26.1%

29.9%

30.3%

Diversity/spread of investments

4.7%

4.5%

4.8%

1.6%

4.5%

5.7%

7.0%

8.0%

5.0%

3.5%

4.7%

5.7%

Background information

5.8%

6.1%

5.4%

7.0%

4.6%

4.7%

5.7%

5.1%

1.1%

4.2%

6.9%

4.7%

Credit and debt

Do you have loans? (including mortgage, car loans, investment loans, line of credit etc.) Yes

56.1%

57.1%

55.0%

45.3%

75.9%

68.0%

37.7%

10.3%

31.9%

47.6%

72.7%

76.9%

73.2%

70.9%

51.6%

79.9%

77.6%

75.5%

67.2%

47.0%

71.5%

77.4%

84.6%

Do you have a credit card? Yes

72.1%

Do you have other debts? (such as school fees, hire purchase, HECS etc.) Yes

22.0%

20.7%

23.2%

39.0%

29.4%

18.5%

4.1%

2.7%

15.6%

22.5%

26.2%

25.1%

89.8%

92.5%

92.1%

89.7%

81.3%

90.0%

89.8%

93.3%

I have the ability and understanding to manage debt Total agree

88.9%

89.9%

87.9%

78.0%

At this point in your life, is it important for you to learn more about how to manage debt? Yes

61.0%

61.2%

60.7%

80.2%

64.1%

53.6%

47.2%

38.3%

57.5%

63.5%

66.3%

57.2%

88.0%

85.6%

82.1%

65.8%

80.9%

87.0%

90.7%

I have the ability and understanding to deal with credit cards Total agree

83.1%

83.7%

82.5%

68.4%

88.1%

At this point in your life, is it important for you to learn more about how to deal with credit cards? Yes

49.3%

49.3%

49.3%

68.2%

48.6%

43.7%

40.4%

32.4%

44.2%

51.8%

53.7%

44.3%

87.0%

82.7%

86.6%

91.2%

84.0%

89.4%

89.0%

82.6%

70.8% 26.1%

74.5% 21.9%

86.7% 12.3%

92.8% 5.3%

82.1% 13.7%

79.9% 17.8%

72.0% 24.7%

69.3% 27.9%

There is no better way of saving money than paying off debt early Total agree

84.9%

83.4%

86.2%

85.6%

I will not get into debt; if I can’t afford it I won’t buy it Total agree Total disagree

75.5% 21.4%

75.2% 21.6%

75.8% 21.2%

69.8% 26.2%

Financial literacy


63.

Women - Age Total

Men

Women

18-29

30-44

45-54

55-64

>64


I feel comfortable with my level of debt Total agree

78.8%

80.5%

77.2%

73.5%

73.8%

78.1%

83.2%

86.2%

70.2%

74.9%

75.0%

82.4%

Total disagree

16.8%

15.4%

18.2%

21.6%

22.6%

18.9%

11.2%

5.4%

22.2%

19.9%

20.3%

15.0%

I regularly pay the total balance owing on my credit card when it is due Total agree

76.2%

78.5%

73.9%

69.6%

69.8%

75.0%

79.7%

85.9%

70.9%

70.8%

70.8%

80.2%

Total disagree

20.4%

17.6%

23.3%

27.2%

27.5%

22.8%

17.7%

10.5%

21.7%

25.6%

26.3%

18.0%

11.3% 86.5%

8.6% 88.9%

8.3% 87.9%

16.7% 79.3%

14.9% 80.0%

14.3% 84.2%

11.6% 87.2%

I usually only pay the minimum amount owing on my credit card Total agree Total disagree

13.2% 83.7%

13.0% 83.5%

13.5% 83.9%

18.3% 79.0%

15.8% 81.7%

And thinking about your loans, which of the following best describes your situation? I usually … Pay minimum 17.1% amount required Pay more than 80.4% minimum Planning and retirement

16.1%

18.2%

23.1%

15.4%

18.0%

23.8%

11.4%

22.7%

20.8%

16.5%

15.5%

81.2%

79.7%

75.6%

83.1%

79.7%

71.9%

77.5%

68.9%

76.5%

82.1%

82.9%

78.3%

84.8%

88.5%

83.4%

72.7%

31.6%

38.5%

67.3%

91.3%

95.6%

83.3%

70.4%

68.1%

80.6%

85.3%

93.5%

82.4%

79.4%

66.6%

73.2%

81.1%

86.0%

Do you have a superannuation fund? Yes

80.9%

83.6%

Financial planning is only important for those who have a lot of money Total disagree

81.7%

80.6%

82.8%

85.5%

84.2%

84.0%

I have the ability and understanding to plan for my long-term financial future Total agree

80.6%

83.8%

77.4%

69.6%

78.2%

80.8%

At this point in your life, is it important for you to learn more about how to plan for your long-term financial future? Yes

77.4%

76.6%

78.3%

90.3%

85.0%

79.2%

67.3%

43.8%

63.5%

76.5%

85.8%

80.5%

76.7%

50.5%

59.6%

73.2%

77.6%

I have the ability and understanding to ensure enough money for my retirement Total agree

62.6%

65.1%

60.1%

57.9%

69.3%

73.7%

74.8%

At this point in your life, is it important for you to learn more about how to ensure enough money for your retirement? Yes

70.6%

69.5%

71.7%

83.4%

85.7%

81.4%

74.0%

57.0%

73.2%

81.5%

86.8%

79.2%

8.8% 86.3%

4.0% 89.3%

4.8% 92.1%

8.5% 87.9%

12.4% 82.1%

27.1% 64.8%

28.2% 65.8%

10.7% 82.9%

5.1% 91.9%

3.2% 94.9%

22.5% 73.8%

10.5% 86.9%

7.9% 88.9%

6.0% 86.1%

31.6% 65.1%

24.9% 70.5%

20.4% 76.7%

15.0% 82.2%

21.4% 37.0%

13.8% 50.5%

12.8% 69.5%

11.8% 80.9%

12.3% 83.0%

Age pension will be sufficient for me Total agree Total disagree

9.4% 85.5%

10.0% 84.6%

Retirement is too far away for me to think about it Total agree Total disagree

20.7% 63.6%

21.2% 63.4%

20.3% 63.8%

43.0% 53.2%

Employer funded superannuation will be enough to cover my retirement needs Total agree Total disagree

64.

14.2% 73.2%

16.1% 73.1%

12.3% 73.4%

12.1% 75.7%

9.2% 83.1%

12.2% 78.8%

13.4% 66.9%

Women - Age Total

Men

Women

18-29

30-44

45-54

55-64

>64


In your opinion when is the best time for a person to start planning for their financial future? Would it be… When starting work

46.5%

41.6%

51.4%

45.6%

50.8%

54.0%

56.2%

54.7%

56.8%

49.2%

51.3%

53.7%

During school days

19.9%

20.4%

19.5%

15.0%

20.9%

20.4%

21.6%

20.5%

23.1%

20.6%

18.4%

17.0%

Have you personally thought about long-term financial plans for the future and your retirement? Yes

75.6%

77.6%

73.6%

59.6%

78.8%

83.4%

79.3%

63.1%

54.8%

70.7%

80.3%

85.7%

No

23.8%

21.8%

25.8%

40.2%

20.9%

16.4%

19.9%

34.0%

43.1%

28.3%

19.3%

14.3%

Thinking about your long-term plans, what were the reasons you started to make these? Enough for retirement/early retirement

39.5%

41.1%

37.8%

29.1%

35.9%

42.5%

41.3%

46.4%

20.1%

36.6%

39.7%

39.9%

To do what I want

19.9%

20.5%

19.2%

21.6%

17.2%

19.4%

21.0%

18.2%

16.1%

19.3%

19.9%

21.9%

Age pension 13.5% insufficient Protecting money

12.6%

14.5%

12.8%

16.1%

15.0%

14.4%

10.8%

11.9%

12.8%

16.2%

15.3%

Do you have insurance? (ie home and contents insurance, car insurance, life insurance etc.) Yes

85.9%

85.2%

86.5%

73.6%

91.7%

92.0%

90.1%

84.3%

80.3%

85.9%

92.8%

95.3%

84.2%

83.5%

77.5%

84.5%

83.6%

84.6%

I have the ability and understanding to choose appropriate insurance Total agree

81.7%

82.0%

81.4%

71.0%

85.6%

83.6%

At this point in your life, is it important for you to learn more about how to choose appropriate insurance? Yes

64.2%

63.4%

65.0%

79.9%

65.5%

60.3%

56.2%

50.8%

60.7%

68.7%

68.5%

62.5%

85.0%

79.5%

74.5%

75.9%

83.1%

89.5%

90.8%

84.6%

84.9%

84.9%

87.6%

I believe in taking out insurance to be prepared for the unexpected Total agree

81.1%

78.7%

83.5%

82.8%

88.4%

I have the ability to understand my rights and responsibilities when dealing with money Total agree

85.4%

85.8%

84.9%

76.4%

84.8%

88.4%

89.4%

91.5%

At this point in your life, is it important for you to learn more about your rights and responsibilities when dealing with money? Yes

73.7%

73.2%

74.2%

85.8%

75.2%

70.1%

67.1%

63.0%

72.6%

75.5%

76.7%

68.9%

86.9%

91.4%

I have the ability and understanding to recognise a scam or investment scheme that seems to good to be true Total agree

87.8%

88.8%

86.7%

77.9%

88.7%

90.2%

89.9%

89.7%

82.0%

87.2%

At this point in your life, is it important for you to learn more about how to recognise a scam or investment scheme that seems to good to be true? Yes 68.5% 68.5% 68.4% 77.9% 65.3% Information and advice I have the ability and understanding to get information about money Total agree 84.5% 84.9% 84.2% 81.2% 85.3%

67.5%

67.3%

61.0%

66.1%

72.9%

70.7%

61.5%

86.5%

84.8%

82.2%

72.5%

82.7%

85.9%

90.3%

60.7%

69.3%

73.3%

66.3%

At this point in your life, is it important for you to learn more about how to get information about money? Yes 67.8% 66.9% 68.7% 82.1% 69.8% 67.0% 62.1% 48.5%

Financial literacy


65.

Women - Age Total

Men

Women 18-29

30-44

45-54

55-64

>64


I have the ability and understanding to deal with banks or other financial services providers Total agree

81.2%

81.9%

80.5%

73.8%

83.4%

82.3%

80.8%

82.3%

77.5%

75.9%

83.3%

86.0%

At this point in your life, is it important for you to learn more about how to deal with banks or other financial services providers? Yes

66.1%

65.2%

67.0%

80.3%

66.2%

64.6%

62.4%

51.1%

60.7%

68.8%

70.0%

63.9%

I have the ability to understand financial language Total agree

63.8%

67.8%

59.8%

50.8%

61.9%

65.3%

61.7%

60.0%

53.2%

55.5%

60.0%

70.1%

Total disagree

27.8%

23.7%

31.9%

39.1%

29.8%

27.3%

30.9%

32.2%

35.5%

35.1%

32.3%

23.7%

58.7%

68.0%

76.8%

68.5%

66.2%

74.0%

77.6%

76.4%

At this point in your life, is it important for you to learn more about how to understand financial language? Yes

68.3%

66.3%

70.2%

81.1%

73.3%

69.6%

64.0%

46.5%

I spend a lot of time thinking about financial information before I make a (financial) decision Total agree

72.9%

71.6%

74.1%

70.6%

77.9%

74.7%

75.2%

67.4%

Thinking about your situation, for financial information or advice would you consider using… Family

63.0%

62.6%

63.3%

85.5%

68.6%

51.2%

46.9%

42.5%

63.1%

58.3%

64.7%

64.8%

Friends

55.0%

57.1%

52.9%

68.1%

60.3%

44.7%

38.4%

30.5%

45.1%

46.8%

53.5%

54.2%

Newspapers

47.3%

50.2%

44.4%

48.3%

46.5%

45.0%

41.2%

32.7%

34.1%

38.8%

46.6%

50.3%

Business/money magazines

47.5%

51.4%

43.6%

48.3%

49.2%

46.1%

34.9%

23.3%

30.3%

33.0%

46.4%

57.9%

Community services

42.1%

36.4%

47.9%

55.7%

50.0%

45.8%

44.5%

32.7%

59.3%

53.5%

49.0%

33.8%

TV or radio

31.0%

31.5%

30.4%

35.0%

31.7%

30.2%

26.5%

21.9%

30.6%

26.7%

35.3%

30.1%

Seminars/ educational institutions

52.1%

53.7%

50.6%

52.5%

49.5%

53.7%

55.2%

38.4%

42.5%

48.8%

53.9%

52.9%

Work

36.8%

41.3%

32.4%

66.7%

52.1%

41.5%

36.0%

17.7%

49.4%

44.2%

49.3%

52.9%

Accountant/tax agent 81.2%

81.3%

81.1%

82.6%

88.4%

78.6%

76.0%

66.8%

70.4%

80.5%

84.8%

88.6%

Financial adviser

82.0%

79.5%

84.4%

86.7%

88.0%

83.9%

82.6%

72.1%

75.3%

85.7%

89.6%

88.2%

Bank

60.2%

55.1%

65.2%

79.1%

65.1%

61.3%

55.5%

55.1%

69.0%

66.1%

68.2%

60.3%

Internet websites

48.1%

49.5%

46.7%

63.4%

54.9%

43.5%

27.8%

15.1%

30.4%

39.8%

49.6%

57.4%

Government websites 49.4%

48.6%

50.2%

62.4%

58.1%

51.2%

34.0%

18.3%

39.4%

43.9%

56.8%

56.7%

Centrelink

25.2%

32.7%

35.6%

28.3%

23.6%

35.8%

52.9%

50.4%

39.3%

27.5%

16.6%

70.0%

61.5%

50.7%

65.5%

70.7%

77.9%

63.1%

68.4%

63.8%

45.3%

52.9%

56.4%

63.6%

64.7%

60.5%

57.5%

66.2%

58.2%

64.3%

62.9%

29.0%

Have you ever used an accountant/tax agent for financial information or advice? Yes

67.9%

69.3%

66.4%

49.2%

74.1%

74.3%

Have you ever used a financial adviser for financial information or advice? Yes

54.4%

55.2%

53.6%

28.1%

56.4%

Have you ever used a bank for financial information or advice? Yes

66.

56.5%

53.0%

60.0%

55.7%

60.8%

Women - Age Total

Men

Women

18-29

30-44

45-54

Women - Household income (thousands) 55-64

>64

$100

What were your reasons for consulting the accountant/tax agent, bank or financial adviser? Tax advice Investment advice

28.2% 26.5%

34.2% 28.7%

22.2% 24.2%

24.8% 16.9%

26.5% 24.7%

22.3% 33.6%

12.1% 21.3%

12.0% 32.0%

13.7% 20.9%

23.8% 23.1%

22.9% 23.5%

25.0% 33.7%

How often do you read financial paper statements that you receive from banks or financial service providers? Read every time Regularly

62.9% 93.1%

61.8% 92.7%

64.0% 93.5%

51.6% 91.1%

63.5% 93.8%

68.2% 95.2%

70.1% 93.8%

76.5% 94.3%

67.7% 93.2%

64.4% 94.2%

62.2% 93.5%

62.4% 93.6%

72.6% 24.2%

73.8% 23.9%

80.8% 17.6%

84.3% 15.0%

To what extent would you say you understand the information provided in financial statements? All or most of it Some of it

79.3% 18.9%

79.9% 18.6%

78.7% 19.2%

72.1% 25.0%

81.1% 17.7%

83.1% 15.3%

77.8% 18.9%

78.8% 18.2%

Financial literacy


67.

I (do not) try to stay informed about money matters and finances


I (do not) spend a lot of time thinking about financial information before making a financial decision





Attitude Money is just a means to buy things

Money is (not) important to be happy in life

Impact of attitudes on behaviour15 Total

I tend to fall behind on loan repayments Women Men

0.8% 1.1%

2.8% 2.7%

I did not save any money in the last six months Women Men

4.9% 6.0%

6.5% 8.8%

I rarely or never read financial statements Women Men

6.0% 6.9%

7.7% 9.2%

9.1%

10.4% 11.8%

8.8% 10.2%

13.0% 13.8%

20.0% 26.6%

13.8% 21.3%

18.7% 30.4%

I do not believe in taking out insurance to be prepared for the unexpected Women Men

11.4% 16.8%

16.3% 22.8%

I check only the balance on financial statements Women Men

12.0% 13.0%

16.6% 17.7%

15.0% 18.0%

14.7% 17.4%

20.1% 18.1%

16.5% 18.0%

21.3% 23.2%

16.2%

15.5%

18.3% 21.7%

17.9% 22.2%

20.4% 24.0%

17.0%

18.9% 19.2%

19.8% 18.4%

18.8%

24.2% 21.2%

20.0%

18.2%

17.0%

17.6%

19.5% 19.0%

21.7% 22.2%

19.3% 21.5%

I do not have insurance Women Men

13.4% 14.7%

I usually only pay the minimum amount owing on credit cards Women Men

13.5% 13.0%

19.2% 18.5%

I save only when I want something big or special Women Men

14.8% 14.3%

I believe that financial planning is only important for those who have a lot of money Women Men

14.8% 16.6%

18.1% 21.1%

33.6% 38.6%

19.9% 25.1%

21.3% 23.5%

19.1% 22.3%

21.1% 22.6%

25.2% 26.1%

23.9% 27.3%

20.2% 20.6%

22.4% 19.4%

21.8% 20.5%

25.3% 24.0%

24.6% 19.2%

26.0% 25.8%

I am not easily able to keep track of my everyday spending Women Men 15

68.

15.7% 15.2%

Consistent with the Attitudes Section in Chapter 3, this table shows values only where those who hold a particular attitude are statistically significantly more likely (at the 95% confidence level) to exhibit a particular behaviour than those who do not hold the attitude.

27.1% 30.8%

I (do not) try to stay informed about money matters and finances

I (do not) spend a lot of time thinking about financial information before making a financial decision

20.9% 21.2%







Attitude Money is (not) important to be happy in life

Total

I do not think about ways to reduce my spending Women Men

16.0% 18.3%

21.9% 24.4%

19.3%

24.7% 26.9%

I do not feel comfortable with my level of debt Women Men

18.2% 15.4%

18.8%

24.8% 22.3%

25.1% 22.1%

24.0%

25.1% 21.6%

26.7% 30.0%

30.9% 31.9%

27.5% 29.0%

32.6% 32.8%

40.2% 37.2%

35.5% 38.8%

25.1% 24.2%

25.4% 26.8%

26.0% 27.4%

24.6% 26.1%

26.7% 26.5%

30.1% 33.2%

25.7%

31.1% 28.3%

29.0% 27.2%

27.4% 28.5%

31.0% 28.0%

30.7% 27.5%

28.0% 21.4%

29.3% 21.6%

31.6%

30.6% 24.7%

28.2% 24.8%

I believe that retirement is too far away to think about Women Men

20.3% 21.2%

24.6%

26.8% 27.6%

29.5% 35.5%

I understand only some or none of the information in financial statements Women Men

21.0% 19.8%

25.8%

22.2% 21.0%

36.4% 32.5%

I do not save Women Men

I do not regularly pay the total balance owing on my credit card when it is due Women Men

23.3% 17.6%

I have not thought about long-term financial plans for the future and my retirement Women Men

25.8% 21.8%

29.5% 25.3%

37.6% 33.1%

29.6% 27.8%

32.6% 27.7%

30.1% 25.2%

39.0% 37.4%

39.7% 32.3%

45.6% 42.7%

33.4% 33.5%

41.3% 39.2%

39.2% 39.2%

31.9% 29.8%

40.4% 37.6%

35.9% 32.7%

57.7% 66.2%

47.3%

57.3% 66.7%

76.0% 70.6%

77.5% 69.2%

76.8% 70.2%

I have problems setting money aside for big purchases or spending Women Men

27.6% 25.8%

36.4% 38.9%

I do not regularly do a budget for day-to-day finances Women Men

43.5% 51.8%

51.5% 57.5%

I would not consider risk and return when making an investment decision Women Men

69.7% 62.0%

77.8% 73.4%

73.8% 65.8%

72.5% 66.6%

Financial literacy


69.

APPENDIX 3: SURVEY METHODOLOGY OVERVIEW The survey for the Financial Literacy – Australians understanding money report was conducted to gain a greater understanding of the attitudes and behaviour of Australians about money. It was commissioned by the Financial Literacy Foundation and conducted by DBM Consultants. This appendix reproduces in large part the methodology appendix contained in the earlier report. The survey was the largest Australian study of its kind, covering 7,500 people aged 12 to 75. The present report has analysed the survey results for the 6,947 people aged 18 to 75, which comprised 4,138 women and 2,809 men. For the data analysis, the final sample was weighted to reflect known population characteristics. Weighting was applied by age, state and gender. The population data was derived from the Australian Bureau of Statistics (ABS) census data. The survey is of respondents’ self assessment of financial understanding and behaviour. It does not aim to provide an objective measure of competency in financial matters, but complements other studies that do so. For the purposes of the survey, financial literacy is defined as ‘the ability to make informed judgements and to take effective decisions regarding the use and management of money’1.16 Most countries use the term ‘financial literacy’ though some, for example the United Kingdom, use ‘financial capability’. 17 This report treats the two terms as interchangeable.18

RESEARCH METHODOLOGY The research methodology for this national study of financial literacy attitudes and behaviour involved five stages: exploratory research, sampling, development work, data collection and data analysis.

Exploratory research A literature review was done to identify existing research in this field. The review included published results from previous studies on financial literacy and related topics from various national initiatives in Australia, Ireland, Singapore, the United Kingdom and the United States. The review identified relevant definitions, concepts and issues for consideration in the present study. •• Definitions of financial literacy were reasonably comparable within Australia, but there is no standard definition that could be applied simply across different communities or countries. •• Concepts relating to financial literacy are generally tailored to meet the national focus or specific purpose of measuring financial literacy in any given country.

16 17

Schagen and Lines, op. cit., p. ii. ‘Financial capability is a broad concept, encompassing people’s knowledge and skills to understand their own financial circumstances, along with the motivation to take action. Financially capable consumers plan ahead, find and use information, know when to seek advice and can understand and act on this advice, leading to greater participation in the financial services market’. HM Treasury, Financial Capability: the Government’s longterm approach, London, United Kingdom, January 2007, p. 19.

18

‘In practice, both cover decision-making, practical skills and behaviour as well as knowledge and understanding. Financial education aims at the same ultimate goal whether that is defined by improving financial literacy or capability’. A O’Connell, Measuring the Effectiveness of Financial Education, Paper prepared for the Retirement Commission, Wellington, New Zealand, April 2007, p. 2.

70.

•• Measures of financial literacy are also given a different emphasis according to the notions of ‘knowledge’ and/or ‘behaviour’ traits that are pertinent to the particular study. •• Measures of financial literacy need to address different levels of sophistication in daily money management, debt, insurance, investments including risk and return, and financial planning. •• Significant differences were expected by age, education and life values with regard to awareness, engagement and competency. •• Barriers to engaging with financial matters are closely related to difficulties in accessing and understanding financial information.

Sampling The quantitative survey was conducted by telephone across a representative sample of 6,947 Australians aged 18 to 75. In proportion to their natural incidence in the population, the target sample for the survey included: •• people from non-English speaking backgrounds; •• Indigenous Australians; and •• Australians living in rural locations. Quotas were set by age and state to ensure a representation by age and geographic location. The following table provides an overview of the final sample size for women by age and state.

FINAL SAMPLE OF WOMEN BY AGE AND STATE Total

VIC

NSW

QLD

SA

WA

NT

TAS

ACT

18 to 19 years old

87

27

35

13

4

6

0

2

0

20 to 24 years old

261

60

96

46

17

24

2

10

6

25 to 29 years old

365

95

117

74

29

31

7

8

4

30 to 34 years old

502

146

176

77

43

38

2

11

9

35 to 39 years old

511

124

152

113

38

55

7

15

7

40 to 44 years old

470

115

135

88

41

60

4

18

9

45 to 54 years old

871

210

293

157

65

98

18

16

14

55 to 64 years old

651

165

224

109

57

57

7

19

13

65 to 75 years old

420

117

142

80

25

40

2

8

6

Total

4,138

1,059

1,370

757

319

409

49

107

68

% of total

100%

26%

33%

18%

8%

10%

1%

3%

2%

A two-step process was used to achieve a stratified random sampling of individuals. Firstly, the electronic White Pages was split by state and, within each state, every household had an equal opportunity of being chosen. Within each selected household, the nearest birthday method (that is, asking to speak to the person in the household whose birthday is next to the date of contact) was applied to determine with which individual the interview would be conducted. If the person was not available, call back procedures were in place to ensure that the nominated individual was given every chance of being included in the study.

Financial literacy


71.

When interviews were required in a foreign language, a suitably trained foreign language interviewer called the respondent to conduct the interview in the respondent’s own language. Follow-up qualitative research was undertaken. Interviews were conducted with a wide cross-section of different groups within the Australian population. These groups were mainly defined by their age, current working status, education and household income. Interviewees were sourced from the sample of quantitative survey respondents and were randomly selected from within each group.

Development work To address the research objectives and take into account the findings of the exploratory research, an extensive quantitative questionnaire was developed. Testing was undertaken to ensure the appropriate wording and flow of questions, and that no technical measurement errors would affect data quality. Testing included: •• Cognitive testing of the questionnaire with a number of respondents across all age groups to ensure that the questions were worded appropriately and any potential for respondents to misunderstand the questions or response categories was minimised. •• Pilot testing of the Computer Assisted Telephone Interviewing (CATI) survey was conducted for a number of interviews to detect any technical set up errors. The flow and structure of the questionnaire was also assessed on the basis of listening to the pilot interviews. Senior researchers debriefed the interviewers upon completion of the pilot to identify any difficulties with the flow and wording of the questionnaire prior to conducting the main study. •• The ABS Statistical Consultancy Unit conducted a formal Forms Review of the survey instrument and the findings were used to improve the questionnaire.

Data collection The final questionnaire was programmed to ensure minimum data collection errors, and a number of checks were done including: •• using CATI to collect the benchmark survey data; and •• a simulation exercise with dummy data and tabular analysis to ensure all skips are correct. During fieldwork operations, DBM used quality control processes including: •• a senior researcher conducting interviewer briefing; •• continuous real time interviewer monitoring by DBM supervisors with 10-20% of each interviewer’s work being monitored; and •• up to seven call backs made at different times of the day and on different days of the week to ensure response rates were maximised. All DBM research staff are members of the Australian Market and Social Research Society Limited (Australia). This means they are bound by the Code of Conduct and the International Chamber of Commerce/European Society for Opinion and Marketing Research’s International Code of Marketing and Social Research Practice. DBM’s telephone operations are accredited by Market Research Quality Assurance which sets Australia’s industry quality assurance standards. DBM is accredited with AS4752, the relevant industry standard. In addition to existing fieldwork accreditation, AS4752 extends to all other research processes. The questionnaire required 23 minutes to administer. A response rate of 10% was achieved.

72.

For the qualitative research, a mix of senior consultants and interviewers conducted the in-depth interviews over the telephone. This method allowed coverage of a wider range of population sub-groups in a timely and cost effective manner. All interviewers and consultants were specially trained on the subject by DBM’s leading social researcher who also conducted several of the interviews. The researcher supervised the team’s fieldwork. On average, qualitative interviews lasted for about 30 minutes, ranging from 25 minutes to over one hour. All interviews were conducted in accordance with the Privacy Act 1988 and recorded for analysis.

Data analysis DBM analysed the data by: •• data weighting using ABS population statistics; •• data filling using models to predict missing values from information already provided by respondents (based on Chi-squared Automatic Interaction Detector procedure); •• exploratory cluster analysis to identify sub-groups within the population and how they varied in terms of the metrics in the questionnaire; •• cross-tabulation analysis to describe the relationships within the variables in the data; and •• tests of statistical significance to determine whether differences between sub-groups were real differences. All tests were conducted at the standard 95% level of confidence.

Financial literacy


73.

Appendix 4: Financial Literacy Foundation The Financial Literacy Foundation was established in 2005 to give all Australians the opportunity to better manage their money. The Foundation aims to build the capacity of all Australians to better understand and manage financial risk, deal effectively with market complexity and take advantage of increased competition and choice in Australia’s finance sector. The Foundation is: •• providing a national focus for financial literacy issues; •• creating opportunities for Australians of all ages to learn more about money – at school, through vocational and higher education, in the workplace and in the community; •• supporting the professional development of teachers; •• providing practical support to educators and trainers and working to improve the availability of quality financial literacy education resources; •• raising community awareness of financial literacy and its benefits through the Understanding Money website and handbook; and •• collaborating with similar overseas organisations to enhance Australia’s approach to advancing financial literacy. The Foundation works in partnership with government, industry and community organisations and acts as a matchmaker by bringing together those organisations and individuals with complementary needs and skills and common commitment to advancing financial literacy. It receives independent and strategic guidance on financial literacy issues from the Financial Literacy Foundation Advisory Board. For more information about the Financial Literacy Foundation: Email:

[email protected]

Website:

www.understandingmoney.gov.au

Mail: Financial Literacy Foundation The Treasury Langton Crescent PARKES ACT 2600 Telephone

74.

(02) 6263 2111


Financial literacy Financial literacy Women understanding money