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Australians Have Low Financial Literacy Knowledge

Aug 23, 2019


Education is the most powerful weapon which you can use to change the world – Nelson Mandela

As I watch my son in Year 12 study for maths I find it interesting that he is doing a chapter on everyday finance and having both a mother and father in finance, growing up around loans and investments and been to numerous wealth building seminars, he has mastered this chapter… not that I can say that about the chapter on calculus.

But this made me think, not all students do this level of maths in year 12, if they study maths at all, given that maths is not a compulsory subject. The other fact is that if you studying even higher levels of maths then you focus on more complex mathematics and what about the students who leave to do a trade or apprenticeship, how do they learn financial literacy.

The recent Households, Income and Labour Dynamics in Australia (HILDA) survey attempted to measure the levels of financial literacy in Australia. The surveyed 17,000 people who were asked five questions relating to financial literacy. The results showed that only 35% of women answered all five questions correctly, compared with 50% of men. However, what was more disturbing was that only 24 percent of all respondents aged 15 – 24 answered all five questions correctly compared with 55 percent for those aged 55 – 64.

Given that everything we do revolves around money, having a certain level of financial literacy is vital for your financial well-being. The HILDA survey also showed that the poverty rate among the least financially literate is more than twice the poverty rate among the most-literate group. This just goes to show that if you want to live a life of financial well being then you need to be aware of the in’s and outs of how it all works.

I’m not saying that you need to go and do a degree in finance, but you must be able to understand the basics of everyday finance. Covering things like understanding tax, super, your cash flow, how interest is calculated on both deposits and loans all this can make a big difference in how you handle your money and the decisions you make.

In the Financially Savvy Academy, I teach all these topics and more! Joining one of our courses allows you to become financially savvy and empowers you with the skill, knowledge to make better financial decisions.

Just in case you were interested, the questions from the HILDA survey were:

  • Suppose you put $100 into a no-fee savings account with a guaranteed interest rate of 2% per year. You don’t make any further payments into this account and you don’t withdraw any money. How much would be in the account at the end of the first year, once the interest payment is made?

  • Imagine now that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, would you be able to buy more than today, exactly the same as today, or less than today with the money in this account?

  • Do you think that the following statement is true or false? “Buying shares in a single company usually provides a safer return than buying shares in a number of different companies.” (True or false?)

  • Again, please tell me whether you think the following statement is true or false: “An investment with a high return is likely to be high risk.” (True or false?)

  • Suppose that by the year 2020 your income has doubled, but the prices of all of the things you buy have also doubled. In 2020, will you be able to buy more than today, exactly the same as today, or less than today with your income?

Hope these few tips help you and give you greater insight into becoming savvy with your money. Keep up to date on my socials so you can be the first to hear my tips, tricks and life hacks. 
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Fairien xx


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