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First consumer study of its kind reveals 1 in 3 Aussies financially vulnerable

By Hannah Twiggs | 24 Sep 2018
5 min read

24th September 2018

A new national study[1] measuring ‘financial consciousness’ saw the average Aussie just scrape a pass, scoring a mediocre 51 out of 100, with one third of respondents failing to even reach half marks.

Worryingly, there is a direct relationship with low scores and poor financial wellbeing overall, with 29 per cent of respondents found to be financially vulnerable, which are those who underperformed in the study’s combined financial wellness and financial consciousness components. This implies nearly 6 million[2] people across the country feel little job security, regularly struggle to pay household bills and are unable to put savings aside.

The Financial Consciousness Index (FCI), which was commissioned by comparethemarket.com.au and developed by Deloitte Access Economics, tested 3,000 individuals’ belief in their ability to influence their financial outcomes, as well as their willingness and sophistication to make a change to improve their financial wellbeing.

Results were weighted for a score out of 100, placing them into one of five groupings associated with different levels of financial consciousness. Scoring less than 35 placed respondents in the lowest category: ‘Don’t know what they don’t know’, whereas scoring between 35 and 45 saw them in ‘It’s a blur’. The average Aussie is deemed ‘Conscious’ by scoring between 45 and 55. Those ‘Rising up the ranks’ scored between 55 and 70, and the ‘Financially Enlightened’ scored over 70 points.

Comparethemarket.com.au General Manager of Banking, Rod Attrill said: “Determining a person’s ‘financial consciousness’ can help form decision makers’ views on how to tackle much broader public policy problems. If people do not feel empowered or able to improve their financial situation, then this has obvious effects on the economic health of the nation as a whole.”

Breaking down the Index and just over a quarter (27 per cent) of respondents met the basic threshold of financial consciousness, giving them an FCI score between 45-55, and only one in ten (9 per cent) people sat comfortably at the peak of consciousness with a score over 70.

Major contributing factors that affected a person’s FCI score include their age, income, gender, location, education, and whether or not they own their own home.

On average, women scored 49, whereas men scored 53, reflecting a range of inherent social factors such as women being less likely to be in full-time work, and therefore more likely to have lower superannuation balances. Middle-aged respondents (the older millennial cohort, Gen-Xers and Boomers) were typically more financially conscious than the very young or old.

Across the country, ACT residents – who enjoy the highest average income and one of the lowest unemployment rates – demonstrated the highest average FCI score of 52.5 out of 100. South Australia and Tasmania were in joint last place, scoring an average of 49.9. In the ongoing battle of the states, NSW rated higher than Victoria, scoring 52.4 versus 50.4.

Income too had a role to play, with higher income respondents, recording a better FCI score. Those earning under $40,000 a year scored 45 on average, whereas someone earning over $190,000 had a score of 63.

Interestingly, those surveyed with higher education were rarely in the highest scoring FCI range – those with postgraduate degrees only scored an average 57 out of 100. The results show a clear gap in many people’s grasp of financial concepts, with less than half of people (40 per cent) answering all financial literacy questions correctly.

“There is a clear relationship between people’s FCI score and their overall financial wellbeing and sentiment. Over half (55 per cent) of Australians with the worst financial capability score said they have struggled to pay their household bills at some point. There is also ongoing concern about holding down a job, with 38 per cent of respondents saying they either worry or feel very little job security.”

Over half (53 per cent) of Australians say their income will be the same this time next year, with 29 per cent believing it is a bad time to try to find a new job. Looking backwards, 29 per cent of respondents were now less confident in their ability to retire comfortably at 65 or in their ability to raise $1,000 in a week.

“By commissioning this report, we hope to capture the attention of a range of stakeholders, including consumers, businesses, and public policy makers. Undoubtedly, we feel it demonstrates that the majority of Australians need greater education, empowerment and understanding to enable them to take tighter control of their everyday finances.”

 

Case studies available:

Kylie – Murray Bridge, South Australia
Relying on Newstart payments and extra cash through online surveys, 30-year-old Kylie is currently unemployed and lives with her parents. After paying her bills, she is left with $80 a fortnight for other expenses. Living with a mental health disorder, Kylie is in the process of applying for the Disability Support Pension. The main debt she has is her car loan, which she repays weekly. She proactively speaks to her insurance company to make sure her car is valued correctly.

Gary – Spotswood, Victoria
38-year-old father of one, Gary has taken a proactive approach to his finances, taking out income protection, repaying more than the minimum towards his mortgage repayments, regularly contributing extra to his superannuation, and saves money into a high interest account – creating a financial safety net to protect his family in case of an emergency. He wasn’t always smart with his money and used to carelessly spend however working with his wife’s financial planner has turned his money management around.

 

For interviews with Rod and more information, please contact:

Claire Rosenberg|07 3708 8696 | 0418 351 178 | claire.rosenberg@comparethemarket.com.au  

About comparethemarket.com.au

Comparethemarket.com.au is a comparison service that takes the hard work out of shopping around. We make it Simples for Australians to quickly and easily compare and buy insurance, energy, travel and personal finance products from a wide range of providers. Our easy-to-use comparison tool enables consumers to find products that best suit their needs and back pocket.

[1] The Financial Consciousness Index (FCI), which was commissioned by comparethemarket.com.au and developed by Deloitte Access Economics, tested 3,000 individuals’ belief in their ability to influence their financial outcomes, as well as their willingness and sophistication to make a change to improve their financial wellbeing.

[2] This figure represents 29% of the estimated Australian resident population as at September 2017, ABS

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Written by Hannah Twiggs

Hannah (or Twiggs as she's known by most of her colleagues) is a non-stop talker, avid snack eater, dog lover and passionate writer. When she's not chatting to journalists or writing up new story angles, Hannah enjoys a good Netflix binge, going away camping with friends and big brunches - preferably with extra bacon.

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