The ﬁnancial literacy of young A

The financial literacy of young Australians: An empirical study and implications for consumer
protection and ASIC’s National Financial Literacy Strategy

Paul Ali, Malcolm Anderson, Cosima McRae and Ian Ramsay of Melbourne Law School, University of Melbourne - 2014

The Australian Securities and Investments Commission (ASIC) has stewarded
the Australian National Financial Literacy Strategy since 2011. Financial
literacy is increasingly recognised as an essential part of consumer protection,
complementing traditional consumer protection mechanisms such as disclosure.
Increased ﬁnancial literacy has signiﬁcant beneﬁts including the potential
to reduce the need for regulatory intervention and enhance economic
participation. While much attention has focussed upon the ﬁnancial literacy of
adults, young people are active consumers and it has been suggested that
their levels of ﬁnancial literacy are not consistent with their extensive consumer
activities. Currently a research gap exists regarding the ﬁnancial literacy levels
and attitudinal/behavioural aspects of young people’s ﬁnancial decision-making. This
article discusses the results of a ﬁnancial literacy survey of senior
students in Australian secondary schools. The survey tested six key areas of
ﬁnancial literacy skills, including their knowledge of consumer rights. The
analyses tested for demographic factors and attitudes that are related to
ﬁnancial literacy. The study contributes important ﬁndings that can assist
ASIC’s ongoing work promoting consumer protection through ﬁnancial literacy
policies and can also assist in the development of ﬁnancial literacy education
programs in schools.

INTRODUCTION
There is increasing recognition of the importance of ﬁnancial literacy to consumer protection in
Australia and internationally. The growth in both the range and complexity of ﬁnancial products and
services requires individuals to have sufficient ﬁnancial literacy to make sound investment decisions
and to understand their consumer rights and identify when these have been infringed. Financially
literate consumers are more likely to be informed and conﬁdent and therefore better able to participate
in economic life. Financial literacy is one of four key factors, along with sufficient income, access to
suitable and affordable ﬁnancial products and appropriate regulation, identiﬁed as necessary for
individuals to achieve positive ﬁnancial outcomes and secure ﬁnancial wellbeing.
The Australian Securities and Investments Commission (ASIC), at the request of the Australian Government,
developed, and is implementing, the Australian National Financial Literacy Strategy (National
Strategy).
2
At the international level, the Organisation for Economic Co-operation and Development
(OECD) has led the push to increase consumer protection by raising levels of ﬁnancial literacy.
*
Paul Ali: Associate Professor, Melbourne Law School, University of Melbourne. Malcolm Anderson: Research Fellow,
Melbourne Law School, University of Melbourne. Cosima McRae: Research Assistant, Melbourne Law School, University of
Melbourne. Ian Ramsay: Harold Ford Professor of Commercial Law, Melbourne Law School, University of Melbourne. This
research was supported by the Australian Research Council (Discovery Project DP1097253). The authors would like to thank
Mark Nevill for his research assistance in coding the survey results.
ASIC, Review of the National Financial Literacy Strategy: Background Report, Report 339 (April 2013) p 9.
ASIC, National Financial Literacy Strategy, Report 229 (March 2011) p 37.
OECD and International Network on Financial Education (INFE), High Level Principles on National Strategies for Financial
Education (April 2012) p 2. These high-level principles were endorsed by the G20 Leaders at the Los Cabos Summit in June 2012.
(2014) 32 C&SLJ 334334
*
At least 36 countries have a ﬁnancial literacy strategy in place and many of these strategies, including
the National Strategy, are guided and supported by the OECD International Network on Financial
Education (INFE) High Level Principles.
The recent global ﬁnancial crisis was a watershed for the international ﬁnancial literacy movement.
Australia’s National Strategy was developed in the wake of the crisis, the events of which
“highlight the importance of improving ﬁnancial literacy levels … to reinforce core ﬁnancial literacy
concepts and to restore consumer and investor conﬁdence”.
Many reforms have been implemented following the ﬁnancial crisis. Some of these reforms are aimed at providing additional protections to
consumers of ﬁnancial products and services.
Those who have promoted these reforms acknowledge
the need to also enhance levels of ﬁnancial literacy. For example, recently there has been a debate
about the appropriate regulatory framework for those who provide ﬁnancial advice to consumers. As
part of this debate, the Assistant Treasurer emphasised the need for enhanced levels of ﬁnancial literacy.
ASIC has indicated that improving access to ﬁnancial advice is important for consumer not
only because of the complexity of ﬁnancial products and disclosure documents and the increased onus
on consumers to make ﬁnancial decisions to ensure their ﬁnancial security, but also because of low
levels of ﬁnancial literacy.
The long-term goal of the National Strategy is to change consumer behaviour, thereby improving
ﬁnancial outcomes and enhancing ﬁnancial wellbeing.
Financial literacy education, targeted at different audiences at different stages of life, is one of the four foundational strategic aims of the
National Strategy and school ﬁnancial literacy is a core component of the ﬁnancial literacy education aim.
ASIC has developed strategic partnerships with state and federal governments and
stakeholders, including schools, teachers and principals, professional associations and curriculum authorities.
A 2013 review of the National Strategy found widespread support for a focus on school
ﬁnancial literacy education under a revised National Strategy for 2014-2017.
From its inception, the National Strategy has stressed that research and ongoing evaluation is
fundamental to ﬁnancial literacy education policies and initiatives.
The priority areas of the National Strategy are informed by current evidence from national ﬁnancial literacy surveys and studies of
Gifroni A and Messy FA, Current Status of National Strategies for Financial Education: A Comparative Analysis and Relevant
Practices, OECD Working Papers on Insurance and Private Pensions No 16 (2012) p 6.

OECD and INFE, n 3.
OECD and INFE, n 3, pp 2-3.
ASIC Report 229, n 2, pp 13-14.
Some recent examples are the Corporations Amendment (Future of Financial Advice) Act 2012 (Cth) and the Consumer Credit
Legislation Amendment (Enhancements) Act 2012 (Cth).
“The challenge I see is even as we add more regulation to try and help those consumers with information, unless we are
actually doing things to promote ﬁnancial literacy, the more information we give them I don’t think that necessarily leads them
to making more informed choices”: Assistant Treasurer, Senator Arthur Sinodinos, Lateline, Australian Broadcasting
Corporation (11 March 2014), http://www.abc.net.au/lateline/content/2014/s3961375.htm.
ASIC, Access to Financial Advice in Australia, Report 224 (December 2010). See also ASIC, Shadow Shopping Study of
Retirement Advice, Report 279 (March 2012) p 62, where it is noted that some consumers may lack the ﬁnancial literacy to
evaluate the recommendations received from ﬁnancial advisers.
ASIC Report 229, n 2, p 37.
ASIC Report 229, n 2, p 10. The three other core strategic aims are: to provide information and ongoing support such as
developing a dedicated and interactive website for consumers; achieving behavioural change; and co-ordinating a long-term
strategy, including identifying and fostering strategic partnerships with sectors that are best positioned to fund, implement and
monitor ﬁnancial literacy education initiatives.
13
14
15
ASIC Report 229, n 2, p 18.
ASIC Report 229, n 2, p 50.
ASIC, Shaping a National Financial Literacy Strategy for 2014-17: Consultation Feedback Report, Report 374 (October
2013).
16
ASIC Report 229, n 2, p 8.
The ﬁnancial literacy of young Australians
(2014) 32 C&SLJ 334 335
Ali, Anderson, McRae and Ramsay
consumer behaviour. As ﬁnancial literacy is a relatively new policy area, ASIC recognises the
importance of research and program evaluation in the foundational years of the National Strategy.
Further, a key dimension of the partnership model of the National Strategy, which includes the
government, industry and education sectors, is the continuous and efficient sharing of resources,
particularly research.
18
In the context of these large scale new policies around ﬁnancial literacy and
education, and as with any new policy intervention, measurements of current ﬁnancial literacy levels
are necessary.
19
Currently, very little research evidence in Australia and internationally exists that
explores youth ﬁnancial literacy in context by accounting for attitudes and demographic factors that
can impact ﬁnancial literacy.
20
The factors of skills and knowledge, attitudes and behaviours, and
socio-demographic factors have not previously been assessed in one, single study of young
Australians. This study responds to the gap in the research literature on young Australians and their
ﬁnancial literacy. Although the National Strategy positions school education as a priority, there is
insufficient data for this important category of consumers.
In this article the authors present the ﬁndings of a study of the ﬁnancial literacy knowledge and
the behavioural/attitudinal traits of secondary school students in Year 11 at Australian secondary
schools in rural, regional and metropolitan areas. First, the article discusses the importance of ﬁnancial
literacy generally, and speciﬁcally for young consumers and the beneﬁts for individuals. Secondly, the
authors discuss the role of ASIC, Australia’s ﬁnancial services regulator, in promoting the conﬁdent
and informed participation of consumers and investors in the ﬁnancial system and what ASIC is
currently doing to achieve this objective under the National Strategy. Thirdly, the article examines
why education programs are central to building ﬁnancial literacy and the need for empirical research
to underpin new policies and programs. The authors highlight that there is limited evidence regarding
students’ ﬁnancial literacy and the importance of contributing current empirical data. Fourthly, the
article outlines the methodology of the study and presents the ﬁndings. Finally, the article concludes
by discussing the implications of these ﬁndings.

WHAT IS FINANCIAL LITERACY AND WHY IS IT IMPORTANT?
A widely used deﬁnition of ﬁnancial literacy is “the knowledge and understanding of ﬁnancial
concepts, and the skills, motivation and conﬁdence to apply such knowledge and understanding in
order to make effective decisions across a range of ﬁnancial contexts”.
While deﬁnitions of ﬁnancial literacy vary, the vast majority of these characterise ﬁnancial literacy as a “vital life skill for all consumers”
that is comprised of knowledge and complementary attitudes and behaviours that
support the implementation of this knowledge in daily ﬁnancial decision-making. ASIC uses the
OECD deﬁnition above as well as a simpler version in certain contexts: “The ability to make informed
judgments and to take effective decisions regarding the use and management of money.”
ASIC Report 229, n 2, p 37.
ASIC Report 229, n 2, p 49.
ASIC Report 229, n 2, p 54. See generally the discussion in Xu L and Zia B, Financial Literacy Around the World: An
Overview of the Evidence with Practical Suggestions for the Way Forward, Policy Research Working Paper 6107 (World Bank
Development Research Group Finance and Private Sector Development Team, 2012).
Sohn S, Joo S, Grable JE, Lee S and Kim M, “Adolescents’ Financial Literacy: The Role of Financial Socialization Agents,
Financial Experiences, and Money Attitudes in Shaping Financial Literacy Among South Korean Youth” (2012) 35 Journal of
Adolescence 969 at 970.
OECD, PISA 2012 Financial Literacy Assessment Framework (April 2012) p 13.
For example, in the United Kingdom (UK), the term “ﬁnancial capability” is used interchangeably with the term “ﬁnancial
literacy”: see, eg, Atkinson A, McKay S, Kempson E and Collard S, Levels of Financial Capability in the UK: Results of a
Baseline Survey (Financial Services Authority (FSA), March 2006).
ASIC, Financial Literacy in Schools, Consultation Paper 45 (June 2003) p 7.
This deﬁnition was originally used in the UK: Schagen S, The Evaluation of NatWest Face 2 Face With Finance (National
Foundation for Education Research, 1997) and is used by the Australia and New Zealand Banking Group Ltd (ANZ) in their
national surveys of Australia’s adult ﬁnancial literacy; see, eg, ANZ, ANZ Survey of Adult Financial Literacy in Australia (The
Social Research Centre and ANZ Banking Group, October 2008).
(2014) 32 C&SLJ 334336
24
While the knowledge required to be ﬁnancially literate will differ for each person depending on their
circumstances, ASIC considers that the following understanding is generally required:
• saving, how to budget for one’s ﬁnancial needs and priorities, and how to manage money;
• credit and the risks associated with various kinds of debt;
• the importance of insurance as it relates to risk protection;
• basic investment principles;
• superannuation and planning for retirement;
• the importance and beneﬁts of comparison shopping for ﬁnancial products;
• reputable, sound sources of ﬁnancial advice and support; and
• how to recognise potential conﬂicts of interest and how to avoid ﬁnancial scams or fraud.
The following factors are cited in support of the need for increased ﬁnancial literacy. First, the
ability to make sound ﬁnancial decisions is an essential life skill for all Australians, regardless of age.
Sound ﬁnancial decision-making is strongly linked with improved ﬁnancial wellbeing and greater
participation in economic life.
26
Participation in economic life affects quality of life, the opportunities
that people can pursue, their sense of security, and the overall economic health of society. Higher
levels of ﬁnancial literacy are said to have beneﬁts for individuals, families, communities and nations.
27
Australian and international studies ﬁnd that ﬁnancially literate individuals are better able to
save for retirement and plan for future ﬁnancial contingencies.
28
Financially literate individuals are more likely to have a realistic and proactive approach to their current ﬁnancial situation and thereby
increase their ability to maximise savings and minimise ﬁnancial risk.
30
Financially literate people
are more likely to make efficient ﬁnancial decisions
31
thereby increasing their likelihood of achieving
ﬁnancial goals.
32
Secondly, the growing range of ﬁnancial products available is related to changes in demography,
as well as increases in consumer responsibility for superannuation decisions and retirement incomes.
This factor is relevant to all, regardless of age, but there are speciﬁc contexts most relevant to young
people. In Australia and other developed countries, young people are facing increased school and
higher education debt.
34
Young people are expected to make complex ﬁnancial decisions at a much
younger age than their parents.
35
Financial literacy is widely understood to be an intergenerational
skill,
36
that is, ﬁnancially literate people acquire these skills in part from their parents.
However,
there is now a signiﬁcant “generational gap” because rapid economic and social changes limit the role
25
26
ASIC Report 229, n 2, p 11.
ASIC Report 229, n 2, p 5. See also Lusardi A and Mitchell OS, Financial Literacy and Retirement Preparedness: Evidence
and Implications for Financial Education Programs, Centre for Financial Studies Working Paper No 2007/15 (Goethe
University, Frankfurt, 2007).
27
28
ASIC Report 229, n 2, p 16.
Lusardi A and Mitchell OS, “Planning and Financial Literacy: How Do Women Fare?” (2008) 98 American Economic Review
413; ANZ, Adult Financial Literacy in Australia, Research Report (Social Research Centre and ANZ Bank, December 2011)
p 53.
29
Ramsay I and Capuano A, What Causes Suboptimal Financial Behaviour? An Exploration of Financial Literacy, Social
Inﬂuences and Behavioural Economics, University of Melbourne Legal Studies Research Paper No 540 (2011) p 40.
30
31
32
Ramsay and Capuano, n 29, p 29.
Ramsay and Capuano, n 29, p 22.
Hall K, The Importance of Financial Literacy, Speech delivered to the Conference on Deepening Financial Capacity in the
Paciﬁc Region (Sydney, 25 August 2008).
33
34
ASIC Report 229, n 2, p 12.
Lusardi A, Mitchell OS and Curto V, “Financial Literacy Among the Young” (2010) 44 Journal of Consumer Affairs 358
at 359.
35
OECD, PISA 2012 Assessment and Analytical Framework: Mathematics, Reading, Science, Problem Solving and Financial
Literacy (2013) p 142.
36
The ﬁnancial literacy of young Australians
Lissington B and Matthews C, Intergenerational Transfer of Financial Literacy (Massey School of Economics and Finance,
October 2012).
(2014) 32 C&SLJ 334 337
37
25
33
Ali, Anderson, McRae and Ramsay
of intergenerational ﬁnancial learning.
38
The consequence is that the ﬁnancial landscape for young
people is vastly more complex than that of their parents’ generation. In the absence of
intergenerational learning, young people can be seriously disadvantaged by not having ﬁnancial
knowledge and skills that are commensurate with the ﬁnancial decisions they are required to make.
Thirdly, it is suggested that improvements in individual ﬁnancial literacy beneﬁt communities
because an individual’s ability to meet ﬁnancial goals and secure his or her ﬁnancial wellbeing creates
opportunities for social inclusion and enhances the economic health of a society.
By developing
conﬁdence, knowledge and skills to manage ﬁnancial products and services, individuals will be better
able to overcome or avoid ﬁnancial exclusion. Recent studies have linked improved ﬁnancial literacy
with ﬁnancial and social inclusion.
40
Exclusion from mainstream ﬁnancial products and services
negatively impacts a person’s ﬁnancial security
41
and emotional and physical health.
Studies ﬁnd
that low ﬁnancial literacy is more common among groups where disadvantage and ﬁnancial exclusion
is prevalent.
43
In Australia, women, people aged between 18 and 24 years or over 65, people who
speak English as a second language, people in blue collar occupations and people earning less than
$20,000 per annum, or who are reliant on social security beneﬁts are more likely to have low levels of
ﬁnancial literacy.
44
Increasing ﬁnancial literacy is regarded as a means to allow people who are
currently ﬁnancially excluded to have greater knowledge of and access to mainstream ﬁnancial
products and services.
45
This, in turn, is expected to increase individual and family ﬁnancial wellbeing
and social inclusion.
46
These factors suggest that improving ﬁnancial literacy is important not only for
promoting ﬁnancial resilience and optimal ﬁnancial decision-making, but also as a broader social
policy to address poverty and ﬁnancial exclusion. Financial inclusion has been identiﬁed as a key
strategic goal for the National Strategy for 2014-2017.
47
Finally, it is suggested that ﬁnancial literacy can contribute to the economic health of society over
the long term. Experts agree that long-term changes in the ﬁnancial literacy of the Australian
population will take at least a generation.
48
The beneﬁts of generational improvements in ﬁnancial
literacy for Australia’s economic health include improved household savings and economic resilience,
including a decreased reliance on government beneﬁts. Further, it is suggested that higher levels of
ﬁnancial literacy will increase mainstream economic participation and drive competition, thereby
improving market efficiency for the ﬁnancial services sector.
49
This may, in turn, decrease the need for
regulatory intervention.
37
Lusardi A and Mitchell OS, The Economic Importance of Financial Literacy: Theory and Evidence, Working Paper 18952
(National Bureau of Economic Research, April 2013) p 22.
38
39
40
41
OECD and INFE, n 3, pp 9-10.
ASIC Report 229, n 2, p 16.
ASIC Report 229, n 2, p 5.
Connolly C, Georgouras M, Hems L and Wolfson L, Measuring Financial Exclusion in Australia (Centre for Social Impact
for National Australia Bank, University of New South Wales, 2011) p 27.
42
Nelthorpe D and Digney K, The Bulk Debt Negotiation Project: Client Proﬁles and Project Outcomes (West Heidelberg
Community Legal Service and the Victoria Law Foundation, March 2011) pp 9, 14.
43
44
45
46
47
48
49
ANZ, n 28, p 15.
ANZ, n 28, p 1.
Ramsay and Capuano, n 29, p 30.
ASIC Report 229, n 2, p 5.
ASIC Report 374, n 15, p 9.
ASIC Report 339, n 1, p 11.
ASIC Report 229, n 2, p 16.
(2014) 32 C&SLJ 334338
39
42
While these objectives are laudable, Australian and international advocates for vulnerable and
low-income consumers have warned that ﬁnancial literacy, with its focus on consumer education,
should not be implemented at the expense of strong regulation. Assisting consumers who are
particularly vulnerable to exploitation and unmanageable debt requires more than ﬁnancial literacy
education. Further, consumer advocates submit it is erroneous to assume that all detriment, particularly
for low-income and vulnerable consumers, is caused by low ﬁnancial literacy.
51
It is expected that
young people will have more limited ﬁnancial knowledge by virtue of their limited life experience. A
core challenge is determining what ﬁnancial literacy is expected of young people relative to their
experiences.
52
The OECD has consulted with educators and policy-makers from various countries to
develop a consistent framework for measurements globally and has identiﬁed a series of cognitive
learning processes that are expected to be acquired by 15-year-olds in schools in developed countries,
relevant to their ﬁnancial literacy.
53
First, the mathematical skills required to, for example, calculate
percentages and convert one currency to another.
54
Secondly, the language and reading skills required
to interpret advertising and contractual texts, such as mobile phone contracts.
55
Thirdly, the maturity
to manage the emotional and psychological factors that inﬂuence ﬁnancial decision-making.
The OECD also expects students will have attained certain ﬁnancial knowledge in four key areas
by age 15. The ﬁrst is knowledge of money and transactions, including an ability to differentiate
between transaction methods, assess value for money, understand basic ﬁnancial documents like bank
statements and understand borrowing and lending concepts.
57
The second is the knowledge required to
manage ﬁnances and identify income types, understand income tax and superannuation, budget,
understand wealth building concepts like investing, identify the beneﬁts of saving and understand the
concept of credit and borrowing.
58
Thirdly, students should have the knowledge about risk and reward
that is required to identify the risks associated with different ﬁnancial products, understand the
importance of insurance and the difference between ﬁxed and variable rates of interest. Finally,
students are expected to have a contextual knowledge of the role of money in society. This is required
in order to understand the rights and obligations they have as consumers and how these can be
enforced, the role of individual choice in spending and saving, the legal responsibilities of contracting,
where to get help with ﬁnancial products, how to identify trustworthy ﬁnancial product providers and
how to protect themselves against ﬁnancial risk and scams. This also requires a level of reﬂective
thinking so that students can identify possible factors inﬂuencing their choices as consumers and the
role of peers and parents in informing ﬁnancial decision-making.
59
How do these international benchmarks ﬁt with current expectations for young Australians? A
number of the expected learning outcomes contained in the National Consumer and Financial Literacy
Framework (Consumer Framework) developed in 2005 by the Ministerial Council for Education,
Early Childhood Development and Youth Affairs (MCEEDYA) (now the Standing Council of School
Education and Early Childhood) are similar to these international benchmarks. The Consumer
50
Robson J and Canadian Centre for Financial Literacy, The Case for Financial Literacy: Assessing the Effects of Financial
Literacy Interventions for Low Income and Vulnerable Groups in Canada, Research Report (Social and Enterprise Development
Innovations, November 2012).
51
Consumer Credit Legal Centre (NSW) Inc, Australian Consumers and Money – A Discussion Paper by the Consumer and
Financial Literacy Taskforce, Submission to the Consumer and Financial Literacy Taskforce (July 2004) p 2.
52
Messy FA, Relevance of Financial Literacy in the New Financial Landscape – Main Target Audiences: Women and Youth
OECD/INFE Policy and Assessment Tools, Paper presented at the OECD Global Financial Literacy Summit (Amsterdam,
14 November 2012).
53
54
55
56
57
58
59
OECD, n 21.
OECD, n 21, p 14.
OECD, n 21, p 21.
OECD, n 21, p 14.
OECD, n 21, p 15.
OECD, n 21, p 20.
OECD, n 21, p 21.
The ﬁnancial literacy of young Australians
(2014) 32 C&SLJ 334 339
56
Ali, Anderson, McRae and Ramsay
Framework expects Year 10 students to have knowledge and understanding of the value of money,
income and expenditure and an ability to understand basic ﬁnancial language such as an employer pay
slip.
60
Students are expected to know why reliance on credit can cause ﬁnancial difficulty and explain
the consequences of over-indebtedness. Students are expected to be able to identify their consumer
rights and responsibilities and identify risks or scams. They are also expected to be able to understand
factors impacting on consumer choice and compare the value of goods and services. Students are also
expected to be able to demonstrate an ability to create simple daily budgets, make plans for the future,
balance risk and reward and compare goods and services. Students are expected to demonstrate critical
thinking skills including an ability to discriminate between fact and opinion in advertising.
The
OECD and MCEEDYA Frameworks can be used as benchmarks to assist in measuring the ﬁnancial
literacy of young Australians.
ASIC AND THE NATIONAL FINANCIAL LITERACY STRATEGY
From a regulatory perspective, ﬁnancial literacy can be understood to be a consumer “responsibilisation
tool” that empowers and educates consumers, in this way providing a “basis for better choice and
through knowledge and understanding reducing the potential for fraud”.
62
ASIC regards ﬁnancial
literacy policy as important and complementary
63
to other regulatory tools designed to protect
consumers and ensure markets function effectively.
64
There are ﬁve regulatory tools currently used by
ASIC in its capacity as the national regulator responsible for the enforcement and compliance of laws
for the ﬁnancial services sector.
65
These are:
• education, encompassing ﬁnancial literacy;
• guidance to industry on how ASIC administers laws to clarify legal obligations;
• surveillance of entities to test compliance with laws and to analyse outcomes for consumers and
investors;
• enforcement actions, including criminal, civil or administrative actions following investigations;
and
• negotiated outcomes, such as enforceable undertakings.
66
ASIC’s stewardship of the National Strategy is consistent with the regulator’s statutory aim of
promoting the conﬁdent and informed participation of investors and consumers in Australia’s ﬁnancial
system
67
and the education component of its activities. While there is rarely consensus for regulatory
policy with objectives that impact a broad spectrum of stakeholders, ﬁnancial literacy is widely
accepted as a positive policy initiative.
68
Despite this, proponents of ﬁnancial literacy acknowledge it
is a policy with limitations, not least that outcomes of ﬁnancial literacy education can be difficult to
measure
60
61
62
69
and that it is not to be treated as a “panacea” for all consumer detriment or market
MCEEDYA, National Consumer and Financial Literacy Framework (September 2011) p 17.
MCEEDYA, n 60, p 22.
Pearson G, “Reconceiving Regulation: Financial Literacy” (2008) 8 Macquarie Law Journal 45 at 53; see also Ramsay I,
“Consumer Law, Regulatory Capitalism and the ‘New Learning’ in Regulation” (2006) 28 Sydney Law Review 9 at 13.
63
64
ASIC Report 339, n 1, p 25.
ASIC Report 229, n 2, pp 39-40. The Strategy Report states that for optimal working of ﬁnancial literacy strategies the
following requirements must be met: access for consumers and investors to simple and relevant information about ﬁnancial
products; adequate disclosure to allow for comparison and risk assessment; access to high quality, independent advice in the case
of complex products; and prevention of misleading and deceptive conduct.
65
ASIC, Submission to the Senate Inquiry into the Performance of the Australian Securities and Investments Commission, Main
Submission by ASIC (October 2013) p 100.
66
67
68
69
ASIC Submission, n 65, pp 100-101.
Australian Securities and Investments Commission Act 2001 (Cth), s 1(2)(b).
Pearson, n 62, at 46.
FSA and Personal Finance Research Centre, Evidence of Impact: An Overview of Financial Education Evaluations
(May 2008).
(2014) 32 C&SLJ 334340
61
failures.
70
Financial literacy has, notwithstanding such critiques, recently been identiﬁed as integral to
a broad range of policy frameworks, including social and ﬁnancial inclusion, in addition to consumer
protection and the regulation of ﬁnancial markets.
71
There are seven principles that guide ASIC’s work to promote conﬁdent and informed consumer
participation under the National Strategy: inclusiveness; engagement; diversity; knowledge and
empowerment; improving outcomes; partnerships; and measurement.
72
While ASIC has the overall
responsibility for the development of the National Strategy, the responsibility for the delivery of
ﬁnancial literacy programs is shared with the ﬁnancial services, community, government, and
education sectors.
73
In its own capacity, ASIC has developed and launched the MoneySmart website,
with ﬁnancial literacy information and online calculators and tools, that is reported to receive 400,000
visitors each month. ASIC has also completed the trial of MoneySmart Teaching, with over 8,000
teachers nationally receiving professional education. A dedicated education program for people aged
16 to 25 years, MoneySmart Rookie, was launched in June 2013. ASIC also has a dedicated
Indigenous ﬁnancial literacy program, which includes outreach work in remote communities.
There
are 41 staff in the ASIC ﬁnancial literacy team, which works in partnership with banks and ﬁnancial
service providers to promote ﬁnancial literacy.
76
ASIC advances the National Strategy through implementation of policies and programs in four
key areas. The ﬁrst is the provision of information and ongoing support, which encompasses
developing resources such as the MoneySmart website. The second is education, including the core
objective of integrating ﬁnancial literacy into the national curriculum.
77
The third is achieving
behavioural change, including integrating insights from behavioural economics
and inﬂuencing
public policy and product design to change consumer behaviour. The fourth is operationalising
long-term co-ordination of the Strategy, including building and maintaining partnerships, networking
and knowledge sharing. This includes research that will evaluate ﬁnancial literacy levels in different
cohorts and evaluate ﬁnancial literacy programs for effectiveness.
79
ASIC states that since 2011 there
has been “major progress” in Australian school education programs. In particular, ASIC highlights that
consumer and ﬁnancial literacy programs are now integrated into the Australian national curriculum,
in the mathematics curriculum and from 2014 ﬁnancial literacy is one of four core concepts that will
guide the economics and business curriculum. By 2020 all students in Australia will learn this content
in Years 5-8.
80
IMPORTANCE OF SCHOOL EDUCATION IN BUILDING FINANCIAL LITERACY
ASIC’s focus on school education is consistent with the guidance of the OECD, which states that
national strategies should introduce ﬁnancial education as soon as possible, preferably in the school
curriculum.
81
ASIC highlights that education, using established pathways, is critical to ensure equal
opportunity for Australians. Established education pathways are early childhood education, schools,
70
Pearson, n 62, at 55. See for a critique of ﬁnancial literacy initiatives in retail market regulation, Moloney N, “Regulating the
Retail Markets” (2010) 63 Current Legal Problems 375 at 420.
71
72
73
74
75
76
77
78
ASIC Report 374, n 15, p 4.
ASIC Report 229, n 2, pp 16-17.
ASIC Submission, n 65, pp 35-36.
See https://www.moneysmart.gov.au.
ASIC Submission, n 65, p 36.
ASIC Submission, n 65, p 41.
ASIC Report 229, n 2, p 10.
For a detailed overview of how ASIC understands and responds to behavioural economics insights for ﬁnancial services and
ﬁnancial literacy education policies, see ASIC, Financial Literacy and Behavioural Change, Report 230 (March 2011).
79
80
81
ASIC Report 229, n 2, p 10.
ASIC Report 339, n 1, p 17.
OECD and INFE, n 3, p 15.
The ﬁnancial literacy of young Australians
(2014) 32 C&SLJ 334 341
78
75
74
Ali, Anderson, McRae and Ramsay
further education including tertiary, vocational training, adult and community education. The focus on
school education in part responds to concerns that young people engage with money and ﬁnancial
services from a far earlier age and are more frequently the targets of corporate advertising and
marketing.
82
The purchasing power of young consumers is well recognised and consequently
“children and adolescents are increasingly the target group for different forms of marketing practices
and commercial pressures in order to stimulate and inﬂate their consumption”.
ASIC states that
young Australians should, upon leaving school, be equipped with the knowledge and skills required
for ﬁnancial decision-making, understand their consumer behaviour and know how to ask those
questions that will enable savvy ﬁnancial decision-making, thereby being capable of securing and
improving their ﬁnancial wellbeing.
84
The focus on school education can also be understood in light of the ﬁnding that while Australians
in general have reasonable levels of ﬁnancial literacy, certain groups, including young people, do not
have levels of ﬁnancial literacy sufficient to understand ﬁnancial concepts and make sound ﬁnancial
decisions. Studies ﬁnd that many Australians have signiﬁcant gaps in ﬁnancial knowledge and that
complex, unfamiliar or long-term ﬁnancial matters are challenging for these people.
Studies also ﬁnd
that while young people are conﬁdent in their capacity as consumers,
86
their more limited ability to
manage income and understand their consumer rights places them at risk of poor decision-making.
The consequences of poor decision-making for young people include the risk of serious ﬁnancial error
leading, in some cases, to debt stress.
88
Studies of Australian secondary school students and mobile
phone debt have found that “bill shock” is common and that many young people have difficulties
understanding mobile phone contracts and plans.
89
Financial literacy education in schools has been recommended as an appropriate means of
empowering and educating young consumers and raising levels of consumer rights awareness, itself an
important aspect of ﬁnancial literacy.
90
A national study of youth debt in 2007 found that one quarter
of the 12-17 year olds surveyed had some form of debt, and while serious ﬁnancial debt affects a small
proportion of this group, the levels are concerning.
91
This study also highlighted the role of ﬁnancial
literacy education, but noted that it lacked resources and consistency in Australia.
Raising the levels
of ﬁnancial literacy in Australia is regarded as a necessary response to rapid changes in Australia’s
ﬁnancial system, the increase in the number and complexity of available ﬁnancial products and the
need to self-fund retirement.
93
How and when an individual acquires ﬁnancial knowledge and skills and gains ﬁnancial
experience will vary. Advocates of ﬁnancial education in schools suggest that this is the most efficient
82
83
84
85
86
ASIC Report 229, n 2, p 18.
Consumer Affairs Victoria, Consumer Education in Schools, Background Report (2003) p 7.
ASIC Report 229, n 2, p 18.
ASIC Report 229, n 2, p 15.
Australian Financial Literacy Foundation (AFLF), Financial Literacy: Australians Understanding Money (2007) Appendix 1:
Young People and Money.
87
Kell P, MoneySmart Rookie Campaign Launch, Speech delivered at the University of Technology (Sydney, 18 June 2013);
Commonwealth Bank Australia Foundation, Results of the 2006 Australian Financial Literacy Assessment (2006);
Commonwealth Bank Australia Foundation, Results of the 2005 Australian Financial Literacy Assessment (2005).
88
89
Kell, n 87.
Department of Communications, Information Technology and the Arts, The Social Impact of Mobile Phone Use in Australia:
A Review of Data Sources (April 2005) p 24; Fieldgrass L, Mobile Matters: The Youth Advocates Project – Developing a Youth
Participatory Action Research and Advocacy Program, Report of the Australian Communications Consumer Action Network
(2011) pp 9-10.
90
91
Fieldgrass, n 89, p 27.
Vittles P, Rintoul D, Power B and Keevy N, Young People (12-17 Years) and Financial Debt (National Youth Affairs
Research Scheme, 2007) p 19.
92
93
Vittles et al, n 91, p 47.
ASIC Report 229, n 2, p 12.
(2014) 32 C&SLJ 334342
83
85
92
87
way to increase ﬁnancial literacy.
94
The education pathways of early childhood, school and further
education including vocational training, university and adult education play signiﬁcant roles in
ﬁnancial literacy acquisition.
95
Because studies ﬁnd a link between the educational attainments of
parents and ﬁnancial literacy test scores
96
it is suggested that ﬁnancial education programs in schools
have the strongest potential to reach a broad cross-section of a population and address issues of
equality.
97
It is also suggested that because it will take a generation to increase Australia’s national
ﬁnancial literacy levels, it is critical to start ﬁnancial education at a young age and school is the most
effective place for this learning to occur.
98
The increased interaction of young people with money and
corporate targeting of young consumers through advertising, social media and mobile phone
technology are issues cited in support of educational interventions from a young age.
Schools are not
the only place where it is expected people will attain ﬁnancial literacy.
100
It is acknowledged that
crowded school curricula and the development and delivery of new education programs pose
challenges for education systems.
101
For the reasons cited above, however, it is suggested that schools
are an effective and efficient way to increase ﬁnancial literacy and address equity concerns by
delivering programs to a broad cross-section of young people.
PREVIOUS RESEARCH ON YOUNG AUSTRALIANS AND FINANCIAL LITERACY
When compared with adult ﬁnancial literacy studies, there is only a small body of Australian and
international research on the levels of ﬁnancial literacy of young people.
102
The ANZ Bank Adult
Financial Literacy Survey suggests that young Australians are likely to have low levels of ﬁnancial
literacy.
103
The ANZ study found that 18-24-year-olds are one of ﬁve main demographic groups with
low ﬁnancial literacy in Australia. The study ﬁnds 18-24-year-olds perform poorly at forward ﬁnancial
planning and keeping track of ﬁnances, have a lower ability to choose suitable ﬁnancial products and
a weaker awareness of ﬁnancial liability.
104
The 18-24 year age bracket performs poorly on questions
assessing basic ﬁnancial knowledge and numeracy and is more likely to exhibit a range of behaviours
and attitudes strongly associated with sub-optimal ﬁnancial outcomes such as a lack of awareness
about their consumer rights and obligations.
105
The most recent Australian studies of youth ﬁnancial literacy were conducted in 2005 and 2006
by the Commonwealth Bank. These studies surveyed 15-year-old students to measure their basic
ﬁnancial literacy knowledge and attitudes to money. Both studies found signiﬁcant gaps in the
ﬁnancial literacy of these students.
106
For example, while students had conﬁdence in their skills as
consumers, many had difficulty understanding ﬁnancial transactions. Strong ﬁnancial literacy was
evident in some areas, for example 80% of students were knowledgeable about marketing and
advertising initiatives and pricing strategies and the same number could demonstrate proﬁciency in
94
95
96
97
98
99
100
101
OECD, n 35, p 142.
ASIC Report 229, n 2, p 18.
Lusardi et al, n 34 at 363.
OECD, n 35, p 142.
ASIC Report 229, n 2, p 6.
ASIC Report 229, n 2, p 18.
ASIC Report 229, n 2, p 22.
ASIC Report 229, n 2, p 16; OECD, Financial Education in Schools: Challenges, Case Studies and Policy Guidance,
Guidance Report (2012).
102
103
104
105
106
OECD, n 35, p 143.
ANZ, n 28, p 5.
ANZ, n 28, pp 9-10.
ANZ, n 28, p 93.
Commonwealth Bank (2005), n 87.
The ﬁnancial literacy of young Australians
(2014) 32 C&SLJ 334 343
99
Ali, Anderson, McRae and Ramsay
managing basic daily expenditure.
107
However, a much smaller number could understand the more
complex ﬁnancial knowledge questions. Only 50% of students could accurately interpret a bank
statement and were familiar with ﬁnancial terminology such as “disposable income, superannuation,
insurance or surcharge”. Half of the students surveyed did not understand the purpose of having car
insurance and 30% could not calculate best value for money when assessing different pricing
regimes.
108
Some very basic questions, such as how to calculate which notes to request to withdraw a
set amount from an ATM machine could not be answered by 15%-20% of students. Up to 20%-30% of
students were unable to detect indicators of credit card fraud. Both studies found a “startling number
of anomalies” in the actual financial capabilities of young Australians. This is considered to place
young people at greater risk of adverse ﬁfinancial decision-making.
109
There has, to date, only been one national study of the attitudes of Australian young people to
money. In 2007 the Australian Financial Literacy Foundation, the federal government body
responsible for coordinating ﬁnancial literacy research and initiatives, surveyed 553 12-17-year-olds.
The survey measured self-assessed attitudes and behaviours about ﬁnancial matters. The survey did
not measure actual levels of ﬁnancial literacy. In certain areas, participants were found to be conﬁdent
in their ﬁnancial knowledge and capacities. Around two-thirds agreed that they had the ability and
understanding to budget and 72% said they were conﬁdent in their ability to keep track of everyday
spending. Around 90% reported they had the ability to save money.
110
However, only a quarter of
participants said they regularly completed a budget for day-to-day ﬁnances and around half said they
were conﬁdent in their ability to manage debt. A majority of the young people surveyed did not agree
planning for the ﬁnancial future is important, but 85% thought it was important to learn more about it.
The survey found 67% responded that retirement, including superannuation and retirement planning,
was too far away to think about.
111
International studies ﬁnd that there is a frequent discrepancy
between people’s self-assessed knowledge and capabilities and their actual knowledge as measured in
surveys or tests.
112
This has been found in surveys in the United States
113
and in Europe.
Data on the ﬁnancial literacy of young people can assist in establishing appropriate, targeted and
responsive education programs. A review of the international literature ﬁnds three key areas that, as a
matter of best practice, should be included in studies of ﬁnancial literacy. The ﬁrst is to measure
knowledge and skills – what people know about ﬁnance, ﬁnancial language and how they apply this
knowledge in practice.
115
The second is to measure particular behavioural and attitudinal traits of
participants.
107
108
109
110
111
112
113
116
Attitudinal traits such as conﬁdence are suggested to be instrumental in applying
Commonwealth Bank (2005), n 87, p 4.
Commonwealth Bank (2005), n 87, p 6.
Commonwealth Bank (2005), n 87, p 4.
AFLF, n 86, p 57.
AFLF, n 86, p 58.
Lusardi and Mitchell, n 37, p 1.
Lusardi A, Americans’ Financial Capability, NBER Working Paper No 17103 (National Bureau of Economic Research,
June 2011) pp 2-3.
114
van Rooij M, Lusardi A and Alessie R, “Financial Literacy and Stock Market Participation” (2011) 101 Journal of Financial
Economics 449.
115
116
OECD, n 35, p 143.
Ramsay and Capuano, n 29, p 31; OECD, n 35, p 144; Huston S, “Measuring Financial Literacy” (2010) 44 Journal of
Consumer Affairs 296 at 310.
(2014) 32 C&SLJ 334344
114
ﬁnancial knowledge successfully in decision-making contexts.
117
The third is to account for ﬁnancial
literacy and relevant socio-demographic factors.
STUDY
Survey design
118
Financial literacy skills and knowledge were measured with 32 multiple choice questions developed to
assess the following areas: ﬁnancial decision-making; ﬁnancial language comprehension; formal
ﬁnancial literacy measuring the ability to conduct basic calculations and using practical skills to
determine correct answers; ﬁnancial knowledge comprehension, measuring awareness of matters such
as investing or the classiﬁcation of job types; consumer rights awareness; and ﬁnancial risk awareness.
These answers were then scored by reference to a 100 point scale, and a percentage of correct answers
from 1%-100%. Participant attitudes to money were measured using 13 self-assessed, agree-disagree,
Likert scale questions. Three questions measured the extent to which participants felt conﬁdent about
managing their day-to-day spending and saving; their understanding of the language used by banks;
and self-knowledge of consumer rights. The survey also asked which persons participants thought
were trustworthy in ﬁnancial matters and who participants currently discussed money matters with.
Five survey questions probed for personal attitudes in respect of money and saving and thinking about
the ﬁnancial future. The combination of multiple choice questions and self-assessed attitudes was
designed to allow for comparisons between test scores and particular attitudes to money. A draft of the
survey was tested prior to implementation with six young people aged between 15 and 17 who
provided feedback about survey readability, salience and relevance. The survey instrument also
collected certain demographic information about participants, such as, gender, the language spoken at
home, whether they worked part-time, and the occupation of their parents. This information was used
to provide a socio-demographic “snap shot” of each participant.
Sample
A database of over 100 Victorian secondary schools with information on each school’s
socio-economic proﬁle, student cohort and learning outcomes from the Department of Education and
Early Childhood Development annual school reports was used to select nine representative schools to
participate in the study which was conducted in 2012. These schools were chosen because it was
believed that they were typical of secondary schools in metropolitan, rural and regional city areas of
Victoria. Discussions with the principals and teachers of these schools found considerable support for
the study and consensus that ﬁnancial literacy education programs would beneﬁt the students in their
schools. Of the nine schools that participated in the study, three schools are located in metropolitan
Melbourne, three schools are located in rural regions of Victoria and three schools are located in
regional cities of Victoria. In the interests of preserving the anonymity of schools they are not named.
The sample of 207 participants (who were all Year 11 students aged 16-17) consisted of 65
participants from schools in regional cities, 83 participants from schools in rural Victoria and 59
participants from schools in metropolitan Melbourne. There were 115 female and 92 male participants.
Twenty-one participants spoke a language other than English at home and six participants identiﬁed as
Aboriginal or Torres Strait Islander. The survey found that 121 participants had part-time jobs.
Findings
Following completion by the participants the surveys were coded and results recorded in a database.
From these results, averages for each question and information about demographic results were
determined. The average test score for all participants was 62.8. The highest individual test score was
100.0 and the lowest was 24.2. Across the six areas of ﬁnancial literacy measured there were
117
118
Ramsay and Capuano, n 29, p 53.
The ﬁnancial literacy of young Australians
Worthington A, “Predicting Financial Literacy in Australia” (2006) 15 Financial Services Review 5 at 59; de Bruin WB,
Vanderklaauw W, Downs JS, Fischhoff B, Topa G and Armantier O, “Expectations of Inﬂation: The Role of Demographic
Variables, Expectation Formation, and Financial Literacy” (2010) 44 Journal of Consumer Affairs 381; Ramsay and Capuano,
n 29, p 90.
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Ali, Anderson, McRae and Ramsay
considerable variations. On average, participants scored most highly in the area of ﬁnancial
decision-making (82.0) and ﬁnancial language comprehension (77.9). Lower average scores were
recorded in the areas of ﬁnancial risk awareness (67.9) and consumer rights awareness (54.1). On
average, the participants performed lower in the questions assessing formal ﬁnancial literacy (52.0)
and ﬁnancial knowledge (41.8). There was a slight difference for average scores based on gender. On
average, male participants scored slightly higher (65.0) compared with females (60.8). Across the
speciﬁc areas of ﬁnancial literacy tested, males scored slightly higher than females in the area of
ﬁnancial language comprehension (78.4) vs (77.4); in the area of ﬁnancial knowledge comprehension
(45.0) vs (39.3); in the area of consumer rights awareness (55.9) vs (52.7); and formal ﬁnancial
literacy (57.6) vs (47.6). Females on average scored slightly higher in the area of ﬁnancial
decision-making (83.0) vs (80.71). In the area of ﬁnancial risk awareness there was little gender
difference: males scored on average 67.7 and females scored 68.1.
There was a small difference between participants who had part-time employment and those who
did not. Participants with part-time jobs scored on average slightly lower overall (61.2) than those
without a part-time job (65.5). There was also a small difference relating to the language spoken at
home. Participants who spoke a language other than English at home scored on average slightly higher
(65.9) than those who spoke English at home (62.4). Participants with one or more parents currently
working in a professional occupation scored on average higher overall (68.5) than those that did not
(60.5). There was a signiﬁcant difference between the average score for metropolitan participants
(73.3) and non-metropolitan participants (58.8). The survey found 86.9% of participants reported that
they currently discussed money with parents, 40.9% with their friends and 30% with their siblings. A
smaller percentage of participants stated that they discussed money matters with teachers (8.6%), other
relatives (20.2%), ﬁnancial advisors such as bank managers and accountants (14.6%) or their
employers (13.6%). An overwhelming majority of participants (87%) agreed with the statement
“Saving money is important to me”. The same number agreed that they thought about saving money
for the future. Over half the participants disagreed with the statement: “I don’t like thinking about
money”. Over 70% of participants agreed that learning more about money and ﬁnances is important.
One key ﬁnding is the discrepancy between the self-assessment conﬁdence about abilities and
demonstrated abilities. Participants on average performed poorly on those questions that measured the
ability to implement skills such as budgeting and calculating, with an average score of 52.0. However
77.7% of participants agreed they were conﬁdent in managing their spending and saving. This ﬁnding
suggests that while participants may feel conﬁdent in their abilities, they may lack the concrete skills
that in practice enable them to budget and manage ﬁnances effectively. Another key ﬁnding is that
participants who agreed with the statement “Saving money is important to me” had much higher
scores in the area of formal ﬁnancial literacy than those who disagreed with this statement. Further,
participants who agreed with the statement “Leaning more about money and ﬁnances is important to
me” had higher overall average scores (65.4) than those who disagreed with this statement (56.6). This
ﬁnding suggests that a positive attitude to saving money and learning more about ﬁnancial matters
may impact on levels of ﬁnancial literacy.
Results of regression tests
The second stage of analysis was a series of regression tests to determine relationships of signiﬁcance
between demographic characteristics (including the geographic region of participants, gender, parental
occupation and part-time work) and test scores. Regression tests were also conducted to determine
whether certain attitudes and participant answers about who is considered trustworthy have a
relationship to the survey scores.
Geographic regions
The survey classiﬁed the schools into three regions: schools located in the metropolitan region of
Melbourne; schools located in rural regions; and schools located in regional cities. As Table 1
indicates, test scores for participants in the metropolitan schools were substantially higher than for
participants in regional city schools and rural schools. When test scores are arrayed into quartiles, the
contrast is even more marked. Examining the metropolitan school sample, some 60% of participants
returned test scores that were ranked in the highest quartile (Table 2). Only 15.4% of participants in
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regional city schools and 11.3% of participants in rural schools scored well enough to be placed in the
highest quartile. Again, by contrast, one in three of the participants in rural schools were in the lowest
quartile, as compared with one in eight of the participants in metropolitan schools. This is displayed
graphically in Figure 1.
TABLE 1 Average test scores by three regions
Region Test score
Metropolitan 73.3347
Regional cities 59.7220
Rural 56.8566
TABLE 2 Proportion of participants in each test-score quartile by region
Metropolitan Regional city Rural
Lowest quartile 12.7 23.1 37.5
Mid low quartile 16.4 44.6 23.8
Mid high quartile 10.9 16.9 27.5
Highest quartile 60.0 15.4 11.3
FIGURE 1 Proportion of participants in each test-score quartile by region
As indicated in Table 3,
119
Analysis of Variance (ANOVA) and Multiple Range T-Tests, or
Scheffe Tests found that the main differences in scores occurred: between schools in the metropolitan
119
The ﬁnancial literacy of young Australians
This table is a summary of seven separate ANOVA tests. Each ANOVA test is to see if the mean scores differ from zone to
zone. In all cases degrees of freedom (df) is two (Between Groups) and 197 (Within Groups) on Oneway Analysis of Variance
tests. For signiﬁcance levels, one asterisk indicates signiﬁcance at the 0.05 level; while two asterisks indicates signiﬁcance at the
0.01 level. If the ANOVA is signiﬁcant, the two ﬁnal columns report statistical signiﬁcance from Scheffe tests between different
(2014) 32 C&SLJ 334 347
Ali, Anderson, McRae and Ramsay
region and schools in regional cities; and between schools in the metropolitan region and rural
schools. This pattern was evidenced when tested on the basis of the test-score and ﬁve of the six
ﬁnancial literacy indices. Only the Financial Decision-Making Index did not reveal any statistically
signiﬁcant differences among average scores from the three regions. As the Scheffe tests also show,
there was negligible difference in scores for schools in regional cities and rural schools (none of which
were statistically signiﬁcant).
TABLE 3 Summary of ANOVA results on regional differences on overall test scores and
for each sub-area of ﬁnancial literacy tested
Index Signiﬁcance F-Ratio F-Prob Scheffe
1
Overall test score ** 18.8914 0.0000 * *
Financial Decision-Making
Index
1.0004 0.3696
Financial Language
Comprehension Index
Formal Financial Literacy
Index
Financial Knowledge
Comprehension Index
Consumer Rights
Awareness Index
Financial Risk Awareness
Index
** 6.8200 0.0014 *
** 22.8971 0.0000 * *
** 8.7322 0.0002 * *
** 7.2841 0.0009 * *
** 5.0863 0.0070 * *
Gender
A slight majority of participants were female (55.6%). Males scored slightly higher overall (65.0% of
answers corrects) than females (60.8%) but regression analysis found that this difference was not
statistically signiﬁcant. In one of the ﬁnancial literacy areas there was a statistically signiﬁcant
difference for gender, for those questions assessing formal ﬁnancial literacy. In this area male
participants’ scores averaged 10 percentage points higher than females, 57.6% correct for the male
average as against 47.6% for females.
Part-time employment
Nearly three-ﬁfths of participants were employed part-time. The authors sought to determine whether
part-time work might aid or hinder participants’ ﬁnancial literacy. There was no real difference in the
overall test scores between workers (averaging 61.2% correct) and non-workers (65.1% correct). This
was also checked with a Chi-square test where participant test scores were allocated into quartiles:
there was no relationship of signiﬁcance between higher quartile participants and the likelihood of
holding part-time work. Exactly half of the top quartile participants held part-time employment,
compared to three-ﬁfths of those in the lower three quartiles. However, for the bottom quartile, there
was no statistically signiﬁcant difference in the proportion which held part-time jobs as opposed to the
proportion of job-holders in the three upper quartiles.
With respect to gender, there was a difference in whether participants held part-time employment,
with more females working (67.0%) than their male counterparts (47.8%). There was also a great
pairs of zones. The column headed “Scheffe 1” tests between the means of metropolitan and regional cities; “Scheffe 2” tests
between the means of metropolitan and rural. There were no signiﬁcant differences between regional cities and rural. Sheffe test
signiﬁcance (one asterisk) is normally reported (as it is here) at the 0.05 level of signiﬁcance.
(2014) 32 C&SLJ 334348
Scheffe
2
difference between the likelihood of participants in non-metropolitan regions holding down a part-time
job (69.0%) than their metropolitan counterparts (of whom, only 32.7% held part-time jobs). On a
Chi-Square test of independence, this difference was statistically signiﬁcant at the 0.01 level (Pearson
Chi-Square value of 21.64707; p=0.00000). Given that non-metropolitan participants overall (as the
survey has shown) tended to score far lower on test scores, the authors tested both gender and
employment – together with region in an Ordinary Least Squares (OLS) regression. Based on the
results of this analysis, part-time employment, the authors conclude, neither hinders nor advances
ﬁnancial literacy.
Parental occupation
Answers given by participants of their parents’ occupations were coded as professional, managerial, or
ﬁnancial. As Table 4
120
shows, the overall test score was signiﬁcant between groups where the
participants indicated at least one parent was in a ﬁnance-related occupation (versus non-ﬁnance
occupation). It was also signiﬁcant for four of the six indices. However, there were no statistically
signiﬁcant differences for participants with a parent in either a professional or managerial occupation
(tested, respectively with a non-professional and non-managerial occupation). This was the same
across each ﬁnancial literacy area tested.
TABLE 4 T-test differences on test scores overall and for each sub-area of ﬁnancial
literacy tested according to parental occupation in ﬁnance-related position
Index Finance Non-ﬁnance Signiﬁcance
Overall test score 79.5 61.6 **
Financial Decision-Making Index 94.2 81.2 **
Financial Language Comprehension Index 81.7 77.6
Formal Financial Literacy Index 80.0 50.2 **
Financial Knowledge Comprehension Index 58.5 40.7 *
Consumer Rights Awareness Index 67.9 53.2
Financial Risk Awareness Index 89.7 66.5 **
The authors sought to test the inﬂuence of a parent working in target occupations while factoring
for part-time work and gender. The OLS regression results found that, again, participants with a parent
in a ﬁnance-related occupation positively impacted test scores.
Self-assessed conﬁdence
Regressions using correlations with relevant indices measured whether self-assessed conﬁdence was
related to actual test scores in these areas. First, the scores for questions assessing formal ﬁnancial
literacy were correlated with self-assessed conﬁdence in managing spending and saving. This test was
then repeated with scores in the area of ﬁnancial language comprehension and self-assessed
conﬁdence in understanding ﬁnancial language, and scores in the area of consumer rights awareness
and self-assessed conﬁdence in understanding consumer rights. The tests found that only the ﬁrst pair
– namely conﬁdence in managing spending and saving – positively correlated with scores in the area
of formal ﬁnancial literacy: correlation r=0.037; signiﬁcant at the 0.05 level. There was no correlation
between the other two indices and their respective self-assessed questions.
120
The ﬁnancial literacy of young Australians
T-Tests scores between groups where at least one parent was in a ﬁnance-related occupation (versus a non-ﬁnance
occupation). Sample size: n=13 for ﬁnance-related occupation; n=194 for non-ﬁnance-related. For signiﬁcance levels, one
asterisk indicates signiﬁcance at the 0.05 level; while two asterisks indicates signiﬁcance at the 0.01 level (separate variance
estimates; two-tailed test).
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Ali, Anderson, McRae and Ramsay
Attitudes to money
Five questions asked participants to respond to a series of attitudinal propositions about money. These
questions were: “Saving money is important to me”; “I don’t like thinking about money”; “I think
about saving money for my future”; “Money is just for spending on the things I want”; and “Learning
more about money and ﬁnance is important to me”. The survey tested to see if overall test scores were
any different if participants agreed with the proposition or if they disagreed (or were neutral). Those
who agreed with the ﬁrst attitudinal question, “Saving money is important to me” tended to score
more highly on overall test scores than those who did not (statistically signiﬁcant at the 0.01 level).
Similarly, those who agreed with the ﬁfth proposition, “Learning more about money and ﬁnance is
important to me” scored more highly on overall test scores than those who disagreed. These results
suggest that those who have a positive attitude to saving money and a positive attitude to learning
more about money and ﬁnance have higher levels of ﬁnancial literacy than those who do not.
Discussions about ﬁnances
Participants were presented with a list of people and asked if they currently discussed money matters
with them. Table 5
121
reports whether there were any differences in overall test scores between
participants who consulted a particular group and those who did not. Those who gained higher test
scores tended to talk with parents or teachers about ﬁnancial matters.
TABLE 5 T-Test differences on overall test scores according to who was consulted in
respect of ﬁnancial advice
Group T-Test signiﬁcance Higher test-score if consulted
Friends n/a
Parents ** YES
Siblings x YES
Teachers * YES
Other relatives x NO
Financial planners n/a
Employers x NO
While the survey found a difference in test-scores between participants who did discuss ﬁnancial
matters with parents (n=172 or 83.1% of the total sample) and those who did not (n=35 or 16.9%), the
authors sought to look at this relationship in terms of top and bottom quartiles of participant ability as
measured by their test score. Table 6
122
presents proportions of participants in the top and bottom
quartiles who consulted parents about personal ﬁnances. As can be seen, the overwhelming proportion
of participants in the top quartile did discuss personal ﬁnances with their parents (94.6%). There was
a statistically signiﬁcant difference between the percentage of participants in the top quartile who
consulted their parents about personal ﬁnances, and the percentage of participants in the bottom
quartile who consulted their parents.
121
T-Tests scores between groups “Currently discuss with” v “Non-discuss”. For signiﬁcance levels, an “x” indicates
signiﬁcance at the 0.10 level; one asterisk indicates signiﬁcance at the 0.05 level; while two asterisks indicates signiﬁcance at the
0.01 level (separate variance estimates; two-tailed test).
122
Testing the null hypothesis that percentages (discussing with parents) are the same with a Chi-Square test of independence,
the hypothesis was rejected with a Pearson Chi-Square value of 4.90149 (p=0.02683), thus statistically signiﬁcant at the 0.05
level. Since it was possible for scores to “clump” at particular values, “quartiles” are necessarily approximate only: from Q1 and
Q4, the sample sizes are, respectively, n=52 and n=56.
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TABLE 6 Cross tabulation of sample “discussing personal ﬁnances with parents” by
test-score quartiles
Variable label Quartile 1
(lowest)
Discussed personal ﬁnances with parents 80.8 94.6
Did not discuss with parents 19.2 5.4
These ﬁndings suggest that discussion about ﬁnances with parents enhances ﬁnancial literacy for
young people. A similar ﬁnding is reported in studies of Australian adult ﬁnancial literacy – adults are
more likely to have higher levels of ﬁnancial literacy if they currently discuss, or have discussed,
money matters with their parents.
Trustworthiness
Table 7
124
123
reports whether there were any differences in overall test scores between participants who
agreed that a particular type of individual was trustworthy – and those who did not agree. Those who
believed teachers were trustworthy (in respect of the participant’s personal ﬁnancial decision-making)
tended to return higher test scores.
TABLE 7 T-test differences on overall test scores according to who was consulted in
respect of ﬁnancial advice
Group T-Test signiﬁcance Higher test score if thought
trustworthy
Teachers * YES
Parents n/a
Friends n/a
Accountants n/a
Bank managers n/a
Gamblers x NO
DISCUSSION AND CONCLUSION
The central ﬁndings of this study are that there are gaps in the ﬁnancial literacy levels of participants
and that these gaps are most prominent in the areas of formal ﬁnancial literacy, consumer rights
awareness and ﬁnancial knowledge. Identifying the areas where there are gaps can assist in the
development of education programs that address these gaps. Another important ﬁnding is the
discrepancy between self-assessed conﬁdence about abilities and demonstrated abilities. The study
also ﬁnds that those participants who view saving money and learning more about ﬁnancial matters
positively had higher overall test scores, suggesting that these attitudes may play a role in ﬁnancial
literacy. The study ﬁnds that there are certain relationships that may play a role in young people’s
ﬁnancial literacy, namely that those who consider teachers trustworthy with money matters and those
who discuss money matters with parents and teachers score more highly.
123
124
ANZ, n 28, p 112.
The ﬁnancial literacy of young Australians
T-Tests scores between groups “Thought trustworthy” v “Other”. For signiﬁcance levels, an “x” indicates signiﬁcance at the
0.10 level; one asterisk indicates signiﬁcance at the 0.05 level; while two asterisks indicates signiﬁcance at the 0.01 level
(separate variance estimates; two-tailed test).
(2014) 32 C&SLJ 334 351
Quartile 4 (top)
Ali, Anderson, McRae and Ramsay
The study ﬁnds signiﬁcant differences in test scores for participants in different geographic areas
– lower scores for participants in rural areas and regional cities and higher scores for those participants
in metropolitan areas. Further and more detailed research can identify which factors speciﬁc to
regional and rural Australia are at play in the development of ﬁnancial literacy skills. The ﬁnding that
parental occupation is related to higher test scores is consistent with the ﬁndings of international
studies
125
that individuals from families with higher education levels and ﬁnancial assets perform
better in measures of ﬁnancial literacy. While it is beyond the scope of this study to address this issue
in all its complexity, the ﬁndings suggest rich ground for further investigation about the impact of the
socio-economic circumstances of families and how this may inﬂuence a young person’s ﬁnancial
literacy levels.
The ﬁndings have important implications for policy-makers, educators, regulators and researchers
interested in ﬁnancial literacy and consumer protection. In relation to consumer protection, when
young people have higher levels of ﬁnancial literacy, this can result in more informed ﬁnancial
decision-making and thereby protect young adults as consumers. The connection between ﬁnancial
literacy and consumer protection has been identiﬁed by the World Bank: “Effective consumer
protection frameworks and institutional structures are necessary but not sufficient conditions for
effective protection of the interests of the consumer of ﬁnancial services. Only informed and educated
users of ﬁnancial services can be fully empowered by the opportunities the modern ﬁnancial system
provides.”
126
Consequently, research that identiﬁes groups that have lower levels of ﬁnancial literacy
links directly to enhancing consumer protection.
In addition, the research ﬁndings in this article contribute new evidence in an area where
signiﬁcant policy, at a national level, is currently being developed and implemented. The National
Financial Literacy Strategy, developed by ASIC at the request of the government, states that:
“Financial literacy education at school is particularly important and is a central concern of this
Strategy.”
127
The National Strategy also emphasises the importance of ﬁnancial literacy research.
This study responds to a key gap in the research literature on young people’s ﬁnancial literacy in
Australia. In particular, the research identiﬁes some aspects of ﬁnancial literacy, such as consumer
rights awareness and ﬁnancial knowledge, where the participants have lower scores, and some groups
of young people that have lower levels of ﬁnancial literacy and therefore are more vulnerable to poor
ﬁnancial decision-making. These ﬁndings assume particular signiﬁcance given how active young
people are as consumers. This research can assist in the development of targeted, relevant education
programs. Financial literacy is a practically oriented, life skill and therefore education programs that
incorporate the ﬁndings of empirical research and that respond to the needs of young people are most
likely to equip them with the skills they need to make sound, informed ﬁnancial decisions.
125
126
Lusardi and Mitchell, n 28.
World Bank, Global Survey on Consumer Protection and Financial Literacy: Results Brief – Regulatory Practices in 114
Economies (2013) p 22. The World Bank has also stated that: “Consumer protection ensures that consumers receive information
that will allow them to make informed decisions, are not subject to unfair and deceptive practices, have access to recourse
mechanisms to resolve disputes when transactions go awry, and are able to maintain privacy of their personal information.
Financial literacy gives consumers the skills to understand and evaluate the information they receive. Together consumer
protection and ﬁnancial literacy set clear rules of engagement between ﬁnancial ﬁrms and their retail customers – and help
narrow the knowledge gap between consumers and their ﬁnancial institutions.”: Rutledge SL, Annamalai N, Lester R and
Symonds RL, Good Practices for Consumer Protection and Financial Literacy in Europe and Central Asia: A Diagnostic Tool
(World Bank, October 2008) p iii.
127
128
ASIC Report 229, n 2, p 18.
ASIC Report 229, n 2, pp 53-54.
(2014) 32 C&SLJ 334352
128