Financial decisions, like many decisions in life, are complex and highly contextual. The expanding body of literature on behavioural economics reflects the sustained interest from academics, policy makers and educators in further understanding motivation, and how and why individuals make choices. This literature, in the current context, has much to offer those who seek to build consumer and financial capability and resilience in young people. Overall, the research12 suggests the following:
A number of factors appear to influence people’s knowledge and understanding of financial matters, including their attitudes and beliefs about money, their confidence levels, their interest and engagement levels and their socio-demographic characteristics (e.g. age, gender, level of education, income).
People tend to know and understand simple day-to-day money management concepts like budgeting, credit, savings and debt, but struggle with more complex concepts like investments, superannuation and saving for retirement.
Most people rely on a wide range of information and advice services when researching financial decisions and/or trying to gain financial knowledge, including informal sources (e.g. family and friends, newspapers) and formal sources (e.g. financial advisers/accountants and product providers).
There is a significant mismatch between what people say they know, and what they do know.
The 2008 ANZ Survey of Adult Financial Literacy in Australia found that overall the lowest levels of financial literacy can be found among those aged 18–24 years and over 70 years, those with low levels of education (Year 10 or less) and low socio-economic status.13 Sound consumer and financial skills help individuals and families make the most of opportunities, to achieve their goals and to secure financial wellbeing. By developing foundational consumer and financial knowledge, skills, values and behaviours from an early age, all Australian students, including those from the most disadvantaged backgrounds, will be better equipped to overcome or avoid financial exclusion.
The ongoing instability in world markets subsequent to the Global Financial Crisis in 2008 demonstrates the intricate connections between markets and consumer and financial behaviour around risk and reward. This also demonstrates the need to reinforce core concepts that contribute to financial literacy such as budgeting and saving, living within one’s means, responsible use of credit, diversification and investing only in products that are understood.14
Financial Literacy and Behavioural Change report, (ASIC, 2011).
ANZ Survey of adult financial literacy in Australia, Australia and New Zealand Banking Group (ANZ) 2008. (The Social Research Centre) pages 4–5.
National Financial Literacy Strategy, (ASIC, 2011).