Less than half of all Australians are financially literate. In an age where we will live for longer – and likely have to work for longer – The Possibility Partnership founder and managing director Ava Lawler says marketing and strategic communications has a role to play to help consumers … but we have to help ourselves too.
Financial literacy rates are below 50 percent according to a Melbourne Institute report and our high school students learn more about trigonometry than the power of superannuation and investment.
These were just some of the discussion points from the panel discussion I participated in this week at the Mumbrella Finance Marketing Summit.
The discussion on ‘where the buck stops on financial literacy’ asked how we can improve finance literacy and the role marketing plays to educate all age groups.
Since the beginning of time, those individuals with access to capital and a head for numbers have leveraged their distinct financial advantage and colluded to create an aura of mystique around the world of finance.
The language of discussion around finance is both dull and complex – ‘compound interest’ is about as interesting as compound chocolate but if you describe it as free money, it’s a whole lot more interesting.
In general, most people are disengaged and disenfranchised from financial decisions, and the recent Banking Royal Commission revealed the financiers and insurance sharks who have lined their pockets in glee at our ignorance.
According to the HILDA (Household, Income and Labour Dynamics in Australia) report released by the Melbourne Institute only 50% of men and alarmingly only 35% of women, could answer correctly basic questions on financial literacy.
However, the horrific findings of the Royal Commission and an increasingly competitive banking, super and insurance market that is being shaken up by new technology entrants should start to change that.
Financial brands are increasingly (albeit reluctantly) on board with the need for transparency and simplicity to communicate with consumers, who are turning to independent sources such as The Fierce Girls Guide to Finance and The Barefoot Investor to educate and empower them themselves.
There is a slow, but growing, realisation that consumers can no longer trust the institutions with a vested interest in profiting from fees on our investments or debts – and this epiphany could be the saviour we all need.
The Financial Planning Association research into Raising the Invisible-Money Generation showed that 62% of Australian parents believe their children’s generation will be financially worse off and yet 68% of parents are reluctant to speak to their children about money. And this is despite the ASIC Money Smart research showing a direct correlation between parent discussion and child financial literacy.
As our children move into a world of bitcoins, Afterpay and Apple Pay it will be critical to provide them with the capability and confidence to navigate a world filled with credit temptations.
And to move our nation from its reliance on debt and real estate wealth, we need to elevate the importance of financial literacy. Consumers need to bite the bullet and take more responsibility to learn more and make smarter, better informed decisions.
Financial institutions have a responsibility for transparent and clear communication and our educators need to spend less time discussing trigonometry and more time explaining that superannuation is what will ultimately support us as we wind down from work. Perhaps a better question to be answering for ourselves is ‘where does the buck start’ in financial literacy?