The Cost of Ignorance: How Government Neglect Impacts Australians' Financial Wellbeing

The Cost of Ignorance: How Government Neglect Impacts Australians' Financial Wellbeing

In the midst of Australia's financial landscape, where uncertainty looms and economic decisions have profound impacts on individuals and families, the role of financial literacy stands out as a beacon of hope. However, recent research from the University of Newcastle sheds light on a troubling reality: more than a third of Australians are financially illiterate.

The findings, outlined in the report "Financial Wellbeing and General Life Satisfaction in Australia," underscore a crucial link between financial literacy and overall life satisfaction. It's a sobering revelation that speaks volumes about the state of financial education in the country and the disregard the government has shown towards its citizens' financial wellbeing.

Professor Boedker, one of the researchers behind the study, highlights a concerning statistic: only 66% of Australians can be classified as financially literate, with just one in four individuals answering all five financial literacy questions correctly. This lack of understanding extends beyond mere numbers; it impacts how people perceive their financial wellbeing and, ultimately, their general satisfaction with life.

Moreover, the repercussions of financial illiteracy extend far beyond personal finances. Ludovic Subran, chief economist at Allianz, emphasizes the long-term costs, stating, "Low financial literacy really hurts... over long investment periods, like when saving for retirement, it can literally cost you a fortune." This sentiment underscores the urgency of addressing Australia's financial literacy crisis.

Angel Zhong, associate professor of finance at RMIT, echoes these concerns, emphasizing the positive relationship between financial literacy and financial wellbeing. However, despite its importance, financial education remains largely neglected, with schools offering ad hoc programs and limited support for vulnerable communities, particularly non-English speakers.

At Newcastle Advisors, we see the lack of financial literacy all too often.

We have seen someone in their 50s get in $300,000 of unsecured debt, had another couple whom are cleaners, have 15 credit cards with over $120,000 in debt, the recent indexation of HECs debts illustrated that university educated Australians did not understand the terms of the debt arrangement they entered into to pay for their education. In addition, many university educated Australian’s don’t understand how this debt impacts their ability to borrow money to purchase a home.

The consequences of this neglect are evident in the struggles faced by young Australians, who are grappling with the complexities of financial decision-making amidst soaring living costs. Without a nationally coordinated approach to financial education, the cycle of financial insecurity is likely to persist, taking a toll on mental health and overall wellbeing.

The lack of financial literacy coupled with the governments need to play political football with superannuation, by continually changing the names of contributions, the thresholds, and implementing a death benefit tax, it all points to a government that is looking to get more tax dollars whilst keeping the populous in the dark.

So, what is the solution? It starts with recognizing the pivotal role of financial literacy in shaping individuals' economic futures and, by extension, the prosperity of the nation. Governments must take proactive measures to bridge the financial literacy gap through targeted initiatives and comprehensive education programs.

One approach is to integrate financial literacy into the school curriculum, ensuring that children develop essential money management skills from an early age. Additionally, there's a need for greater collaboration between governments, financial institutions, and Non- for- Profit Organisations to deliver accessible and culturally sensitive financial education programs.

Furthermore, policymakers must prioritize consumer protection measures to safeguard citizens from financial abuse and empower vulnerable groups with tailored financial literacy training. By investing in financial education today, we can pave the way for a more financially resilient and prosperous Australia tomorrow.

The existence of Financial Planning professionals, like myself, are somewhat filling a small part of the gap, however with the increase of compliance and red tape, financial advice is only available to those that can afford to pay $4,000 + which underscores the pressing need for improved financial literacy in Australia. It's time for the government to acknowledge this reality and take decisive action to empower its citizens with the knowledge and skills they need to navigate the complexities of the modern financial landscape. After all, a financially literate population is not just a personal asset—it's a national treasure.

Matthew McCabe