Financial literacy in Australia drops nearly 10%

New data has revealed that more than a third of Australians are financially illiterate.

Greater Bank and Newcastle University interviewed 575 women and 536 men aged between 18 and 90.

The joint report titled: Financial Wellbeing and General Life Satisfaction in Australia found that respondents answered 61.69% of the five financial literacy questions.

The data suggests an almost 10% decline in financial literacy since the federal government’s 2021 Australian Financial Capability Survey reported that 68% of respondents were financially literate.

The survey further indicated that women had higher levels of financial illiteracy, 53.77% were literate compared to men 70.19%.

Women aged 18-24 were the most likely to have a household budget, 50%, while men in the same cohort were lower at 31%.

However, among people aged 25 to 54, men were generally more likely to have a household budget than women.

Men were also generally more likely to have financial goals than women, although this relationship was reversed for the 18-24 age category.

This suggests that although younger men have higher levels of financial literacy, they are less likely than women to apply their financial knowledge to make good financial decisions.

Christina Boedker, professor of accounting and finance at Newcastle University, said results from a national survey clearly show the benefits of financial literacy.

“We found that only 66% of Australians can be classified as financially literate. Only around one in four people answered all five financial literacy questions correctly,” she explained.

Boedker added that with the rising cost of living and high interest rates, it is more important than ever to have higher levels of financial literacy, supported by financial planning activities such as establishing a family budget or setting longer-term savings goals.

The report also found that 13.4% of Australians received financial hardship help in the past 12 months.

A total of 43% of respondents aged 18 to 24 said they could not honor their debts. On average, women were slightly better able to deal with their debts than men.

The report found that men aged 25 and older had more credit cards and personal loans than women of the same age.

In terms of financial autonomy, the survey showed that young adults have significantly lower levels of financial autonomy than all other age categories.

Unsurprisingly, adults with zero or negative income reported the lowest levels of financial autonomy compared to all other income categories.

The average level of financial satisfaction for all respondents was 6.14 on a 10-point scale.

Women reported lower levels of financial satisfaction than men, particularly those aged 18-24, 25-35, and 35-44.

Men over the age of 25 were more willing to take financial risks, especially young men between the ages of 25 and 34.

Meanwhile, people who owned a home, were married and had children reported greater financial satisfaction, compared to those who were not homeowners, single and childless.

The survey concluded that the higher a person’s financial literacy, the less likely that person is to experience financial hardship, but the higher a person’s financial literacy, the lower their financial satisfaction.

“The ‘ignorance is bliss’ effect could be explained in this regard, with those who know more about their financial situation being more likely to be more dissatisfied with it,” he said.

Louis R. Hancock