Defined Terms and Documents       

ADULT FINANCIAL LITERACY IN AUSTRALIA   -   December 2011

Full Report of the results from the 2011 ANZ Survey

ANZ is pleased to present the fourth Survey of

Adult Financial Literacy in Australia. The 2011

Survey captures the complexity of financial

literacy to a greater extent than previous

surveys through focussing on behaviours

indicative of a person’s financial literacy and

examining the associations of those behaviours

with people’s demographic and other

characteristics, including attitudes to finances.

We have chosen to do this in order to provide

more nuanced information to policy-makers and

others engaged in efforts to lift financial literacy

levels in the community.

Comparability with previous surveys has

nevertheless been retained through the large

number of questions unchanged since they

were first asked in 2002.

ANZ thanks the people who produced

the Survey: David Blackmore from the Social

Research Centre and Stephen Prendergast

from Prescience Research for their high

quality research and analysis, as well as Delia

Rickard from ASIC and Catriona Lowe from the

Consumer Action Law Centre for their guidance

and ongoing commitment to illuminating the

issues in financial literacy.

For ANZ the Survey is part of our long-term commitment to improving the financial inclusion and well-being of vulnerable, low financial literacy individuals and communities.

Jane Nash

Head of Financial Inclusion & Capability

Contents

Executive summary..............................................................................................1􀀁

Section 1􀀁 Introduction to the Report..............................................................1􀀁

1.1􀀁 Background.................................................................................................................................1􀀁

1.2􀀁 Context of the survey .................................................................................................................1􀀁

1.3􀀁 Research objectives ...................................................................................................................1􀀁

1.4􀀁 Research design.........................................................................................................................2􀀁

1.5􀀁 Steering Committee....................................................................................................................3􀀁

1.6􀀁 Structure of the report ................................................................................................................3􀀁

Section 2􀀁 Financial Literacy............................................................................5􀀁

2.1􀀁 Introduction and key findings.....................................................................................................5􀀁

2.2􀀁 Defining financial literacy ...........................................................................................................6􀀁

2.3􀀁 Characteristics associated with financial literacy .....................................................................9􀀁

2.4􀀁 The distribution of financial literacy within the population .....................................................12􀀁

Section 3􀀁 Use and Understanding of Payment and Transacting Methods17􀀁

3.1􀀁 Introduction and key findings...................................................................................................17􀀁

3.2􀀁 Use and understanding of methods of payment/transacting.................................................18􀀁

Section 4􀀁 Money Management, Budgeting and Planning Behaviour ........21􀀁

4.1􀀁 Introduction and key findings...................................................................................................21􀀁

4.2􀀁 Money Management and Budgeting .......................................................................................23􀀁

4.2.1􀀁 Responsibility for money management in the household...........................................................23􀀁

4.2.2􀀁 Saving and budgeting - attitudes and behaviour ........................................................................25􀀁

4.2.3􀀁 Minimising fees .............................................................................................................................28􀀁

4.2.4􀀁 Control of current financial situation ............................................................................................29􀀁

4.2.5􀀁 Financial resilience.......................................................................................................................30􀀁

4.2.6􀀁 Sources of general financial information and advice..................................................................32􀀁

Section 5􀀁 Transaction Products ...................................................................37􀀁

5.1􀀁 Introduction and key findings...................................................................................................37􀀁

5.2􀀁 Incidence of everyday banking accounts................................................................................38􀀁

5.3􀀁 Obtaining a new everyday banking account...........................................................................38􀀁

5.4􀀁 Managing everyday accounts – checking account statements.............................................40􀀁

Section 6􀀁 Borrowing and Debt......................................................................41􀀁

6.1􀀁 Introduction and key findings...................................................................................................41􀀁

6.2􀀁 Incidence and source of loan products ...................................................................................43􀀁

6.3􀀁 Understanding of debt repayment responsibility ....................................................................45􀀁

6.4􀀁 Credit card management .........................................................................................................46􀀁

6.5􀀁 Loan acquisition – use of mortgage brokers ..........................................................................48􀀁

6.6􀀁 Management of current debt levels.........................................................................................50􀀁

6.6.1􀀁 Comfort with current level of debt................................................................................................50􀀁

6.6.2􀀁 Missed loan repayments ..............................................................................................................51􀀁

Section 7􀀁 Savings, Investment and Superannuation..................................53􀀁

7.1􀀁 Introduction and key findings...................................................................................................53􀀁

7.2􀀁 Incidence of savings products and investments.....................................................................56􀀁

7.3􀀁 Investing principles and process .............................................................................................58􀀁

7.3.1􀀁 Understanding of investment principles ......................................................................................58􀀁

7.3.2􀀁 Considerations when choosing an investment ...........................................................................60􀀁

7.4􀀁 Superannuation ........................................................................................................................62􀀁

7.4.1􀀁 Number and types of superannuation fund held.........................................................................62􀀁

7.4.2􀀁 Understanding of superannuation ...............................................................................................64􀀁

7.4.3􀀁 Joining a new superannuation fund.............................................................................................68􀀁

7.5􀀁 Retirement Planning and Expectations...................................................................................71􀀁

7.6􀀁 Retirement income ...................................................................................................................75􀀁

7.6.1􀀁 Incidence and types of retirement income stream products ......................................................75􀀁

7.6.2􀀁 Acquisition of retirement income stream products......................................................................76􀀁

7.6.3􀀁 Reverse equity loans....................................................................................................................78􀀁

7.7􀀁 Financial planners ....................................................................................................................79􀀁

7.7.1􀀁 Use of financial planners..............................................................................................................79􀀁

7.7.2􀀁 Choosing a financial adviser ........................................................................................................80􀀁

7.7.3􀀁 Financial planners and conflict of interest ...................................................................................82􀀁

Section 8􀀁 Insurance.......................................................................................83􀀁

8.1􀀁 Introduction and key findings...................................................................................................83􀀁

8.2􀀁 Incidence of insurance products..............................................................................................85􀀁

8.3􀀁 Understanding of insurance products .....................................................................................87􀀁

8.4􀀁 Acquisition of insurance products............................................................................................88􀀁

Section 9􀀁 Consumer Rights and Responsibilities ......................................93􀀁

9.1􀀁 Introduction and key findings...................................................................................................93􀀁

9.2􀀁 Knowledge of consumer rights and responsibilities ...............................................................94􀀁

9.2.1􀀁 Awareness of providers’ responsibilities .....................................................................................94􀀁

9.2.2􀀁 Awareness of consumers’ responsibilities ..................................................................................94􀀁

9.2.3􀀁 Complaints ....................................................................................................................................96􀀁

9.2.4􀀁 Further education in relation to finance.......................................................................................97􀀁

Section 10􀀁 On-line money and financial management ...............................102􀀁

10.1􀀁 Introduction and key findings................................................................................................ 102􀀁

10.2􀀁 Internet access ...................................................................................................................... 103􀀁

10.3􀀁 Use of the internet for comparing financial products .......................................................... 104􀀁

10.4􀀁 Risks associated with internet banking................................................................................ 106􀀁

Section 11􀀁 Financial Attitudes and Numeracy ............................................108􀀁

11.1􀀁 Introduction and key findings................................................................................................ 108􀀁

11.2􀀁 Financial attitudes.................................................................................................................. 110􀀁

11.3􀀁 Numeracy............................................................................................................................... 113􀀁

11.4􀀁 Financial Knowledge and Numeracy ................................................................................... 115􀀁

Appendix One: Technical details of financial literacy analysis...................117􀀁

A1.1􀀁 Summary of financial knowledge/numeracy........................................................................ 117􀀁

A1.2􀀁 Summarising financial attitudes............................................................................................ 118􀀁

A1.3􀀁 Keeping Track of Finances Index......................................................................................... 120􀀁

A1.4􀀁 Planning Ahead Index ........................................................................................................... 124􀀁

A1.5􀀁 Choosing Financial Products Index...................................................................................... 127􀀁

A1.6􀀁 Staying Informed Index ......................................................................................................... 130􀀁

A1.7􀀁 Financial Control Index ......................................................................................................... 133􀀁

Appendix Two: Examples of Australian Geographic Classification

Remoteness Areas ...........................................................................................136􀀁

List of tables

Table 1.4a􀀁 Sample distribution by geographic location......................................................................................3􀀁

Table 2.3a􀀁 Characteristics associated with components of Financial Literacy.............................................9􀀁

Table 2.4a􀀁 Financial Literacy and age/gender subgroups...............................................................................12􀀁

Table 2.4b􀀁 Financial Literacy and education, cultural background, geography and type of household14􀀁

Table 2.4c􀀁 Financial Literacy, disadvantage and employment.......................................................................15􀀁

Table 2.4d􀀁 Financial Literacy, income and asset position ...............................................................................16􀀁

Table 3.2a􀀁 Methods of payment/transacting used by respondents...............................................................18􀀁

Table 4.2.1a􀀁 Financial literacy and household financial management.............................................................24􀀁

Table 4.2.2a􀀁 Self-reported savings behaviour .......................................................................................................25􀀁

Table 4.2.2b􀀁 Budgeting behaviour............................................................................................................................26􀀁

Table 4.2.2c􀀁 Attitudes towards financial planning.................................................................................................27􀀁

Table 4.2.3a􀀁 Steps taken to minimise fees.............................................................................................................28􀀁

Table 4.2.4a􀀁 Extent to which current financial situation is felt to be under control........................................29􀀁

Table 4.2.5a􀀁 Coping with a major loss of income .................................................................................................30􀀁

Table 4.2.5b􀀁 Perceived changes in financial situation and asset position in last 12 months......................31􀀁

Table 4.3.1a􀀁 Use of financial education materials in the last 12 months.........................................................32􀀁

Table 4.3.1b􀀁 Use of financial advice from other people.......................................................................................33􀀁

Table 4.3.1c􀀁 Comparison of financial products and services.............................................................................35􀀁

Table 5.3.1a􀀁 Comparison shopping for an everyday banking account ............................................................38􀀁

Table 5.3.1b􀀁 Reasons for not considering any other accounts..........................................................................39􀀁

Table 5.4.1a􀀁 Checking of everyday banking account statements.....................................................................40􀀁

Table 6.2.1a􀀁 Incidence of loan products .................................................................................................................43􀀁

Table 6.2.1b􀀁 Lending sources used in last 12 months.........................................................................................44􀀁

Table 6.3.1a􀀁 Understanding of borrowing...............................................................................................................45􀀁

Table 6.4.1a􀀁 Checking of credit or store card transactions ................................................................................46􀀁

Table 6.4.1b􀀁 Credit/Store card repayment patterns .............................................................................................47􀀁

Table 6.5.1a􀀁 Use of mortgage brokers ....................................................................................................................48􀀁

Table 6.6.1a􀀁 Comfort with current level of debt.....................................................................................................50􀀁

Table 6.6.2a􀀁Missed debt repayments in the last 12 months .............................................................................51􀀁

Table 6.6.2b􀀁 Reasons for missing repayments in the last 12 months..............................................................52􀀁

Table 7.2.1a􀀁 Types of investment held....................................................................................................................56􀀁

Table 7.3.1a􀀁 Understanding of investment principles ..........................................................................................58􀀁

Table 7.3.2a􀀁 Considerations when choosing an investment ..............................................................................60􀀁

Table 7.4.1a􀀁 Number and type of superannuation fund held .............................................................................62􀀁

Table 7.4.2a􀀁 Understanding of regulatory requirements and taxation of superannuation...........................64􀀁

Table 7.4.2b􀀁 Reading and understanding superannuation fund statements ..................................................65􀀁

Table 7.4.2c􀀁 Reasons for not reading superannuation fund statements.........................................................65􀀁

Table 7.4.2d􀀁 Things looked for when reading superannuation fund statements ...........................................66􀀁

Table 7.4.2e􀀁 Ease of understanding an annual superannuation fund statement ..........................................67􀀁

Table 7.4.2f􀀁 Indicators of superannuation fund performance............................................................................67􀀁

Table 7.4.3a􀀁 Choice of a superannuation fund......................................................................................................68􀀁

Table 7.4.3b􀀁 Comparison shopping when choosing a superannuation fund..................................................68􀀁

Table 7.4.3c􀀁 Reasons for not considering any other superannuation funds ..................................................69􀀁

Table 7.4.3d􀀁 Considerations when choosing a superannuation fund...............................................................70􀀁

Table 7.5.1a􀀁 Expectations of government support for retirees ..........................................................................71􀀁

Table 7.5.1b􀀁 Expected retirement income requirement.......................................................................................72􀀁

Table 7.5.1c􀀁 Voluntary additional contributions to superannuation ..................................................................73􀀁

Table 7.5.1d􀀁 Factors to consider when calculating adequacy of retirement funding....................................74􀀁

Table 7.6.1a􀀁 Incidence and types of retirement income products.....................................................................75􀀁

Table 7.6.2a􀀁 Comparison shopping for retirement income products................................................................76􀀁

Table 7.6.2b􀀁 Criteria considered important when choosing a retirement income product...........................77􀀁

Table 7.6.3a􀀁 Knowledge of reverse equity loans ..................................................................................................78􀀁

Table 7.7.1a􀀁 Use of financial planners ....................................................................................................................79􀀁

Table 7.7.2a􀀁 Comparison shopping when choosing a financial planner/adviser...........................................80􀀁

Table 7.7.2b􀀁 Reasons for selecting a financial planner.......................................................................................81􀀁

Table 7.7.3a􀀁 Financial planners and conflict of interest.......................................................................................82􀀁

Table 8.2.1a􀀁 Incidence of insurance products amongst relevant population groups....................................85􀀁

Table 8.3.1a􀀁 Awareness of important requirements of insurance products....................................................87􀀁

Table 8.4.1a􀀁 Comparison shopping for insurance products ...............................................................................88􀀁

Table 8.4.1b􀀁 Considerations when first taking out an insurance policy ...........................................................90􀀁

Table 8.4.1c􀀁 Considerations when renewing an insurance policy ....................................................................91􀀁

Table 9.2.1a􀀁 Providers’ responsibilities and consumer protection ....................................................................94􀀁

Table 9.2.2a􀀁 Awareness of consumers’ responsibilities......................................................................................95􀀁

Table 9.2.3a􀀁 Confidence in making an effective complaint against a bank or other financial institution. 96􀀁

Table 9.2.3b􀀁Who would be contacted if difficulties could not be resolved with the provider of the financial

product or service.................................................................................................................................97􀀁

Table 9.2.4a􀀁 How well informed consumers feel when making financial decisions......................................98􀀁

Table 9.2.4b􀀁 Self-assessed financial ability............................................................................................................98􀀁

Table 9.2.4c􀀁 Self-assessed financial ability and financial literacy.....................................................................99􀀁

Table 9.2.4d􀀁 Need for further education or information.....................................................................................100􀀁

Table 9.2.4e􀀁 Topics for further education or information...................................................................................101􀀁

Table 10.3.2a􀀁 Use of internet sites for comparing financial products .......................................................104􀀁

Table 10.3.2b􀀁 Products compared using on-line sites..................................................................................105􀀁

Table 10.4a􀀁 Perceived risk associated with internet banking .........................................................................106􀀁

Table 10.4b􀀁 Nature of risks associated with internet banking.........................................................................106􀀁

Table 10.4c􀀁 Ways of minimising risks associated with internet banking......................................................107􀀁

Table 11.2a􀀁 Financial attitudes ..............................................................................................................................110􀀁

Table 11.2b􀀁 Financial literacy and parental discussion of financial matters................................................112􀀁

Table 11.3a􀀁 Numeracy.............................................................................................................................................113􀀁

Table 11.4a􀀁 Financial Knowledge/Numeracy and selected demographic characteristics........................115􀀁

Table 11.4b􀀁 Financial Knowledge/Numeracy and selected socio-economic characteristics...................116􀀁

Table A1.1a􀀁 Variables used in creating summary financial knowledge/numeracy scores .......................117􀀁

Table A1.2a􀀁 Variables used to measure attitudes towards financial issues ................................................118􀀁

Table A1.2b􀀁 Underlying financial attitudes...........................................................................................................119􀀁

Table A1.3a􀀁 Variables used to create Keeping Track of Finances Index.....................................................120􀀁

Table A1.3b􀀁 Keeping Track of Finances Index Regression Results..............................................................123􀀁

Table A1.4a􀀁 Variables used to create Planning Ahead Index .........................................................................124􀀁

Table A1.4b􀀁 Planning Ahead Index Regression Results..................................................................................126􀀁

Table A1.5a􀀁 Variables used to create Choosing Financial Products Index..................................................127􀀁

Table A1.5b􀀁 Choosing Financial Products Index Regression Results ..........................................................129􀀁

Table A1.6a􀀁 Variables used to create Staying Informed Index .......................................................................130􀀁

Table A1.6b􀀁 Staying Informed Index Regression Results................................................................................132􀀁

Table A1.7a􀀁 Broader Financial Outcome Measures used in Financial Control Index ...............................133􀀁

Table A1.7b􀀁 Financial Control Index Regression Results ................................................................................135􀀁

List of figures

Figure 2.2a􀀁 A conceptual framework for financial literacy ..................................................................................6􀀁

Figure 4.2.1a􀀁Responsibility for household financial management in couple households............................23􀀁

Figure 10.2.1a􀀁 Access to the internet ................................................................................................................103􀀁

Figure A1.3a􀀁Distribution of mean Keeping Track of Finances Index scores by age group......................121􀀁

Figure A1.4a􀀁Distribution of mean Planning Ahead Index scores by age group ..........................................125􀀁

Figure A1.5a􀀁Distribution of mean Choosing Financial Products Index scores by age group ..................128􀀁

Figure A1.6a􀀁Distribution of mean Staying Informed Index scores by age group........................................131􀀁

Figure A1.7a􀀁Distribution of mean scores on the Financial Control Index by age group............................134􀀁

Executive summary

E1.0 Introduction

This report presents key findings from the 2011 ANZ Survey of Adult Financial Literacy in Australia1 – the fourth Survey in a series published since 2003.

Financial literacy is the ability to make informed judgements and to take effective decisions regarding the use and management of money2. Financial literacy is therefore a combination of a person’s skills, knowledge, attitudes and ultimately their behaviours in relation to money.

To capture this concept, we focussed on the behaviours that can be considered indicators of a person’s financial literacy. Analysis3 identified five behavioural indicators:

•     Keeping track of finances, for example monitoring account statements and household expenses;

•     Planning ahead, which includes behaviours such as addressing retirement income issues, using financial advisers and using insurance;

•     Choosing financial products; for example the extent of comparison shopping for financial products and services;

•     Staying informed, for example the extent to which people make use of financial information; and

•     Financial control which includes things like control of general financial situation and debt as well as ability to save money.

Having identified the behaviours that indicate a person’s financial literacy, the next step was to examine which groups performed well in terms of these behaviours and which groups did not. In other words, which groups display behaviours that indicate high levels of financial literacy and which display behaviours that indicate lower levels of financial literacy?

Then, to help explain differing levels of financial literacy between groups, associations with peoples’ characteristics such as age, education, household circumstances, financial knowledge, numeracy and financial attitudes were examined.

These explanations are not complete, but they do assist in building our understanding of the characteristics of groups in the community who may benefit from improved levels of financial literacy.

E2 Key Findings

E2.1 Groups with low financial literacy

The survey identifies groups where lower levels of financial literacy are more likely to be encountered. These groups were much the same in 2011 as in previous surveys and included:

•     People who are relatively young (under 25 years);

•     People with no formal post-secondary education;

•     People with relatively low levels of income and assets (e.g. those whose main source of income is a Government benefit or allowance; those with annual household incomes below $25,000; those with less than $2,000 in savings and investments);

•     Those working in lower blue collar occupations; and

•     Females.

It should be kept in mind that, while on average a group may perform relatively poorly on a particular behaviour this does not mean all members of the subgroup perform poorly on that behaviour. For example, as a group those renting their home perform less well than others on financial control; nevertheless, slightly more than one in ten people in this situation have scores that place them in the top 20% of the population on this.

References above:
1     A telephone survey of 3,502 randomly selected Australian adults between July 5 and August 18, 2011.

2     Schagen, S “The Evaluation of NatWest Face 2 Face with Finance”, NFER, 1997.

3     This conceptualization draws on work by the Personal Finance Research Centre at the University of Bristol. (eg: Measuring financial capability: an exploratory study June 2005)

E2.2 Factors that help to ‘explain’ differing levels of financial literacy

• Age

Strong positive associations were identified between age and most of the behavioural indicators of financial literacy from the 25-34 year age group on – there was no association for people in the 18-24 year age group. This is consistent with people learning and having more exposure to financial products and transactions as they move through their lives.

• Financial knowledge and numeracy

Positive associations were identified with all behavioural indicators of financial literacy except for financial control. This suggests that having good levels of knowledge about financial matters generally and numeracy are important, particularly when it comes to choosing financial products, keeping track of finances and staying informed, but other factors are more important for financial control (see Household income below).

• Financial attitudes

Financial attitudes have an association (whether positive or negative) with most behavioural indicators of financial literacy. In particular:

o ‘Financial self-efficacy’ which is about self-confidence and belief in the ability to make a difference to one’s financial situation has a positive association with all behaviours associated with financial literacy; its strongest association is with staying informed suggesting active engagement in managing their finances amongst people with this attitude.

o Finding ‘money dealings stressful’ has a negative association with all behavioural indicators except for planning ahead where there is no association. Its strongest negative association is not surprisingly with financial control likely indicating the stress associated with dealing with financial difficulty. It has a relatively strong negative association with keeping track of finances, choosing financial products and staying informed suggesting a lack of interest or willingness to engage with their finances and shopping around for financial products on the part of some people.

o A ‘thrifty’ attitude has a relatively strong positive association with all components of financial literacy except planning ahead.

• Household income

Household income has a relatively strong positive association with financial control, meaning that in general higher household incomes are positive for financial control.

Financial control is also positively associated with having savings and investments (those with savings and investments of less than $2000 tended to have lower levels of financial control), a thrifty attitude and a high level of financial self-efficacy (i.e. self-confidence and belief in the ability to improve one’s financial situation and to reach financial goals).

Household income has a slight negative association with keeping track of finances, suggesting that higher income households tend to track their finances less closely than lower income households who need to manage their finances more closely. It also has a slight positive association with planning ahead, reflecting a tendency for higher income households to make more use of financial planners and insurance.

Household income alone is not a key influence on other behavioural indicators of financial literacy, particularly engaging in choosing financial products and staying informed about financial matters – people do these things whatever their level of income.

• Education and occupation

Education and occupation have associations with some behavioural indicators of financial literacy, suggesting they are important in some areas but not others.

Completion of formal post-secondary education is strongly positively associated with choosing financial products and staying informed but does not appear to be important for keeping track of finances, planning ahead or financial control.

Being in a blue collar occupation has a slight negative association with keeping track of finances and planning ahead. Being in a white collar occupation is positively associated with staying informed about finances.

E2.3 Some implications of the findings

The 2011 Survey provides a guide to the groups in the community who may benefit from efforts to lift their levels of financial literacy: these are the groups listed above.

The 2011 Survey also shows that financial literacy is complex. Individuals and groups may perform well on some components of financial literacy but not others and people’s financial attitudes affect their level of financial literacy quite strongly.

This provides some guidance for designing financial literacy programs. For example, programs focused solely on raising financial knowledge and numeracy may be effective in improving components of financial literacy such as choosing financial products, keeping track of finances and staying informed; however, their affect on planning ahead is likely to be more limited.

Programs that also take into account and seek to positively influence people’s financial attitudes are likely to be more effective than those that do not. Financial self-efficacy, which is a measure of confidence in dealing with money and of willingness to engage with money management, is positively associated with all components of financial literacy.

The research finds that 36% of people find dealing with money is stressful, even when things are going well. Together these findings suggest that effective program design needs to:

•      find a way to engage people

•     help to overcome the stress some people associate with dealing with money and build confidence in managing money.

This in turn highlights the need for support in the form of advice, ‘coaching’ and tools amongst some groups in the community.

E2.4 Changes over time

This is the fourth ANZ Survey of Adult Financial Literacy since the first in 2003. When the 2011 results are compared with those from the previous surveys, some changes are apparent. One group of changes relates to the GFC and its effects and the other to ongoing efforts to increase awareness of consumers’ rights.

E2.4.1 Changes in financial attitudes and behaviour

Several measures from the 2011 survey support the view that Australians have become more cautious in their financial attitudes and behaviour since the GFC. Financial resilience of households has generally increased, but this has not been the case for all households.

•      In 2011, the number of people saying they try to save on a regular basis (77%) is at the highest level seen in any of the four surveys; the next highest figure was 72% in 2008. This is in line with Australian Bureau of Statistics data showing a marked increase in the savings ratio of Australian households since the GFC.

•      Fewer people had a personal loan (down 5 points since 2008 to 12%), a Line Of Credit or overdraft (down 2 points to 12%) or a lease/hire purchase agreement (down 2 points to 7%).

•      More people report they are in control of their financial situation all or most of the time (up 4 points to 81% in 2011) and fewer people feel they would be unable to manage for a period of time if they experienced a major loss of income (down by 2 points to 22% in 2011).

•      Financial resilience has not, however, increased for all households. For example, those with household incomes of $65,000 or less who are supporting children and/or $300,000 plus mortgages are less likely to feel their financial situation is under control; nor has there been any decrease since 2008 in the proportion who feel this way.

E2.4.2 Changes in investing

Since the GFC financial markets have been characterised by a higher level of volatility and lower investment returns, particularly in shares, which have resulted in some changes.

•     There was greater awareness of investment volatility with more people agreeing that short term fluctuations in market value can be expected even with good investments (up 7 points to 74%).

•      Fewer people held shares (down by 3 points since 2008 and by 9 points since 2002 to 35%) or managed investments (down by 4 points since 2008 and by 13 points since 2002 to 16%).

•      There was greater uncertainty about how to assess the performance of a superannuation fund or managed investment (19% unsure compared with 13% in 2008 and 8% in 2005). While not a change as the question was asked for the first time in 2011, four in 10 people disagreed with the proposition “I would trust financial professionals and accept what they recommend”.

•      The proportion of people saying they read their superannuation statements is down 6 points since 2008 to 69%, which may indicate avoidance of news of somewhat disappointing returns over the past few years. Around a third of people continued to report they found their superannuation statements difficult to understand.

 

E2.4.3 Changes to awareness of consumer rights and responsibilities

 

Changes relating to awareness of the rights and responsibilities of users of financial services were evident in the areas of complaints and insurance.

•      People were more confident about making an effective complaint against a bank or other financial institution. In 2011, 68% were confident or very confident about doing this; up from 58% in 2005 and 63% in 2008.  There was also greater awareness of the industry ombudsman (up 10 points since 2008 to 46%) as a potential source of help in resolving difficulties with the provider of a financial product or service.

•      In 2011 more people were aware of the cooling off period that applies when taking out a new insurance policy (up 6 points since 2008 to 74%).

•      Fewer people were aware that a claim could be refused if the policyholder did not meet their duty of accurate disclosure (down 7 points since 2008 to 47%).

E2.5 Some issues requiring ongoing attention

Issues which are not new, that may require ongoing attention include: underinsurance and understanding risk in investment.

Recent media coverage of the inadequate/inappropriate flood insurance held by many people appears to have done little to raise awareness of the need to ensure the level/appropriateness of existing insurance cover.

• In the 2011 Survey people were less likely to consider the level of cover when renewing an existing insurance policy (27% would do so; down by 3 points since 2008) and hence leave themselves at risk of under-insuring.

• Also, one in five people who owned or were purchasing their home did not have building insurance while one in four of those who owned, were purchasing or renting their home did not have contents insurance. These figures are unchanged since 2008 and suggest that under-insurance continues to be a significant risk for a considerable number of Australians.

• At 53%, the proportion of people who said they would not invest in “an investment advertised as having a return well above market rates and no risk” was not significantly different from 2008. While the marked improvement on earlier results

(46% in 2002) has been maintained, there remains scope for further improvement.

E3 Concluding remarks

In the 2008 Survey Summary Report we noted future surveys could usefully focus on behaviour and the extent to which money management skills and knowledge translate into behaviour.

The 2011 Survey does this by identifying behaviours that are indicators of financial literacy and the groups within the population that perform well against these and the groups that do not. The characteristics of those groups such as age, education, household circumstances, financial knowledge, numeracy and financial attitudes were examined to help explain differences and build a picture particularly of low financial literacy groups. This is a step forward in our understanding of a complex subject.

The 2011 Survey also included some questions which are being used as part of the OECD’s program of financial literacy research4. This will allow for future comparison of

Australian financial literacy measures against international benchmarks.

4 See for example http://www.financialliteracyfocus.org/files/FLatDocs/OECD%20paper.pdf

Section 1 Introduction to the Report

1.1 Background

Financial literacy is an important requirement for functioning effectively in modern society

with trends in retirement income policies, work patterns and demography suggesting its

importance can only increase in the years ahead. With respect to financial literacy the

Australian Securities and Investments Commission (ASIC) note that “knowing how to make

sound money decisions is a core skill in today’s world, regardless of age. It affects quality

of life, opportunities we can pursue, our sense of security and the overall economic health

of our society”5. Similarly at its 2010 Toronto Summit, the G20 emphasised the important

role of financial literacy and financial capability6 in supporting financial inclusion, thereby

enhancing community wellbeing.

ANZ’s first national survey of financial literacy (2002) established benchmark measures

across the Australian population while follow-up surveys conducted in 2005 and 2008 were

used to monitor changes in financial literacy over the next six years.

For the purposes of the 2002 survey, financial literacy was broadly defined as the ability to

make informed judgements and to take effective decisions regarding the use and

management of money7; this was largely evaluated through an assessment of people’s

financial knowledge and numeracy. Since 2002 the concept of financial literacy has

evolved somewhat so that it takes more account of people’s financial attitudes, behaviour

and experiences8 as well as their financial knowledge and numeracy. It is this broader

interpretation that has been used as the basis for evaluating financial literacy in the 2011 survey.

Consequently the development of a quantitative model for this broader view of financial

literacy, and the use of this model as the basis for describing financial literacy within the

Australian community were key tasks for the fourth (2011) ANZ Adult Financial Literacy in Australia survey.

1.2 Context of the survey

When considering the findings presented in this report, it should be kept in mind that

fieldwork for the 2011 survey took place against a background of significant volatility in

financial markets, some weakness in the residential housing market, cautious consumer

sentiment and behaviour including increased levels of household saving and reduction of

household debt and natural disasters earlier in the year in Queensland and Victoria.

This situation is not entirely inconsistent with that existing in May/June 2008 when fieldwork

for the 2008 Adult Financial Literacy survey took place. At that time, the difficulties in the

US financial system which would culminate in the global financial crisis were becoming

increasingly apparent although the crisis itself had not emerged fully. Nevertheless, the

overall context of the 2011 survey appeared a little more negative than the background to

the 2008 survey and considerably less benign than the situation in 2002 and 2005.

1.3 Research objectives

The broad objectives of the 2011 study were similar to those of the previous surveys, specifically:

􀀁 To monitor how aspects of financial literacy have changed compared to the

previous studies of 2002, 2005 and 2008;

􀀁 To continue to inform public policy, particularly as it relates to low financial literacy

segments, to encourage continued focus on the area and to stimulate further

debate; and

􀀁 To provide a valuable information resource that will assist with the development of

strategies to improve financial literacy in the community.

5 ASIC. Report 229 National financial literacy strategy, March 2011.

6 The OECD [OECD PISA 2012 Financial Literacy Framework (Draft) Dec, 2010 (p7)] suggests the terms financial literacy

and financial capability can be used interchangeably.

7 Schagen, S “The Evaluation of NatWest Face 2 Face with Finance”, NFER, 1997.

8 For example, the work of the Personal Finance Research Centre at the University of Bristol; see Section 2.2.

In addition, the 2011 study sought to better describe the relationships between a broader

concept of financial literacy and the factors which might be associated with it; for example

financial knowledge, financial attitudes, financial behaviour and financial well-being.

1.4 Research design

The 2011 study largely repeated the measures taken in the previous surveys and, given

that time-series data were required, the research methodology was kept as consistent as

possible. Key aspects of the 2011 survey included the following:

􀀁 Data collection was by telephone interview and was conducted between July 5 and

August 18, 2011.

􀀁 The questionnaire was broadly similar to that used in 2008 although several

changes were introduced. These included;

o The addition of questions to facilitate the modeling of financial literacy; in

particular questions were added to assess respondents’ financial attitudes

and their overall financial situation;

o The introduction of several new questions (and the modification of some

existing questions) in line with the OECD questionnaire9 to enable some

international comparisons to be made when data are available; and

o Deletion of several questions so the above changes could be introduced

without excessively increasing the administration time of the questionnaire.

As in previous surveys, core questions were asked of all respondents while other

questions were only asked of particular subgroups. Knowledge was tested against

an individual’s needs and circumstances rather than the entire array of financial

products and services, some of which they would neither use nor need. To make

sure no individual respondent was exposed to an excessively long interview, a

number of questions which would have been appropriate to ask of all eligible

respondents, were asked of a randomly selected subgroup. For example, many of

the questions about financial planners were asked of 33% of eligible respondents.

Sample size was sufficiently large to enable this to occur while obtaining

statistically robust results.

􀀁 The sample was stratified by capital city/regional area in each state and territory to

match the sample distribution obtained in the three previous surveys. The number

of interviews conducted in each geographic stratum was proportional to the adult

population resident in that location. The geographic breakdown of the final sample

was as shown in Table 1.4a.

9 International Network on Financial Education, Financial Literacy Measurement Questions & Socio-Demographics,

INFE(2010)3/REV2

Table 1.4a Sample distribution by geographic location

Location

Capital

City Regional

Total

Interviews

Proportion

of Total

Interviews

n n n %

New South Wales . . . . . . . . . . . . . . . . . . . 725 417 1142 33%

Victoria . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647 229 876 25%

Queensland . . . . . . . . . . . . . . . . . . . . . . . 316 379 695 20%

South Australia . . . . . . . . . . . . . . . . . . . . . 194 69 263 8%

Western Australia . . . . . . . . . . . . . . . . . . . 265 91 356 10%

Tasmania . . . . . . . . . . . . . . . . . . . . . . . . . 34 46 80 2%

Australian Capital Territory (ACT) . . . . . 57 - 57 2%

Northern Territory . . . . . . . . . . . . . . . . . . . 19 14 33 1%

Total interviews (n) . . . . . . . . . . . . . . . . . 2257 1245 3502 100%

Proportion of total interviews (%) . . . . . 64% 36% 100%

􀀁 The target population for the survey was all Australians aged 18 years or over who

were accessible by fixed-line telephone. Where more than one eligible person lived

in a contacted household, a random selection procedure10 was used to select the

survey respondent.

A post-weighting procedure was used to align the survey data with the Australian Bureau of

Statistics Estimated Residential Population distribution by age, sex and location. All results

presented in this report have been weighted in this way.

1.5 Steering Committee

As in the previous studies, the 2011 survey was managed by a Steering Committee. The

Committee comprised representatives of ANZ, the Australian Securities and Investments

Commission and the Consumer Action Law Centre.

1.6 Structure of the report

The remainder of this report is divided into ten sections. Each section begins with a

summary of key findings which is followed by the detailed results including data tables,

graphs and associated commentary. The broad topic areas covered in these sections are

as follows:

􀀁 Section 2 explains the definition of financial literacy as used in this research, and

provides an analysis of the relationships that exist between this view of financial

literacy and people’s socio-demographics, financial attitudes, behaviour and

financial situation.

􀀁 Section 3 examines people’s use and understanding of methods of paying for

goods and services;

􀀁 Section 4 reports on people’s money management, budgeting and financial

planning behaviour;

􀀁 Sections 5, 6, 7 and 8 report on the use, understanding and acquisition of financial

products and services including transaction accounts, loans and credit cards,

savings accounts, investments, superannuation, retirement income products,

financial planners and insurance;

􀀁 Section 9 examines consumers’ understanding of their rights and responsibilities;

10 The next person in the household to have a birthday.

􀀁 Section 10 looks at consumers’ use and understanding of the internet in banking

and finance related matters; and

􀀁 Section 11 provides an overview of results for the questions on people’s financial

attitudes and numeracy.

Statistical testing of results

As the results presented in this report are based on sample data rather than a census of the

total population, some variation between the results from the four surveys (and between

subgroups within each survey, since they too are samples of larger populations) will occur

by chance. To help decide whether differences are meaningful (that is, whether they

represent genuine changes or differences rather than just random variation), testing of the

statistical significance of these differences has been carried out.

Results are only described as changed or different if a statistically significant11 difference

exists. Because of this, it is possible for two numbers to appear different but for the

difference to be no more than random variation. For example, the proportion of people who

said they use loans from family and friends was 10% in 2008 and 11% in 2011 (see

Table 3.2a). Despite these numbers not being identical, statistical testing indicates they are

not significantly different from each other; that is, we would conclude there has been no

significant change since 2008 in the proportion of people who use loans from their family or friends.

11 At the 95% level of statistical confidence.

Section 2 Financial Literacy

2.1 Introduction and key findings

This chapter describes the approach we used in 2011 to define financial literacy, how we

went about measuring its components, an analysis of the characteristics which seem to be

most strongly associated with people having high or low financial literacy scores and a

profile of financial literacy scores amongst socio-demographic subgroups.

Key findings

The following key points emerged from this analysis:

􀀁 Financial literacy can be envisaged as consisting of five separate components:

keeping track of finances; planning ahead; choosing financial products; staying

informed; and financial control. Separate indices, based on behavioural indicators,

have been calculated for each of the five components.

􀀁 Regression analysis can be used to identify the personal (financial knowledge,

socio-demographic and finance related attitudes) and household (household type,

housing tenure, income, debt, assets, etc) characteristics which are most strongly

associated with people’s scores on each component of financial literacy.

􀀁 Different characteristics were found to have different levels of association with each

component. Thus:

o Financial knowledge/numeracy was strongly associated with choosing financial

products. However, it had less association with other components (specifically

keeping track of finances, staying informed, and planning ahead) and did not

appear to have any association with financial control.

o Financial attitudes appeared to be strongly associated with most components

of financial literacy. In particular;

o High levels of perceived financial self-efficacy (ie: high levels of self-belief

and self-confidence in the ability to affect your financial situation and to

reach your financial goals) were strongly associated with high scores on

staying informed and relatively strongly associated with the other four

components of financial literacy; while

o A view that financial dealings are stressful was associated with low scores

on financial control, and to a lesser extent keeping track of finances,

choosing financial products and staying informed.

􀀁 These findings suggest that programs focused mainly on enhancing people’s

financial knowledge/numeracy are likely to be effective in improving certain

components of financial literacy – here, choosing appropriate financial products,

keeping track of finances and staying informed. However, approaches that also

take into account and seek to positively influence people’s financial attitudes

appear to have greater potential to positively impact other components of financial literacy.

􀀁 The importance of attitudes also highlights the need for support in the form of

advice, ‘coaching’ and tools amongst some groups in the community

􀀁 Finally, the analysis also suggests that some population subgroups may represent

a higher priority than others in terms of targeting programs designed to enhance

particular components of financial literacy. For example, with respect to keeping

track of finances, males and people working in lower blue collar occupations

appear to be higher priorities than females and those people employed in white collar roles.

2.2 Defining financial literacy

For the purposes of this research financial literacy was defined as the ability to make

informed judgements and to take effective decisions regarding the use and management of

money12.

The implementation of this definition for the initial Adult Financial Literacy in Australia

surveys drew on Schagen’s UK research and described financial literacy largely in terms of

people’s financial knowledge and numeracy. This approach formed the cornerstone of the

surveys conducted in 2002, 2005 and 2008.

However, during the last six years or so the idea of financial literacy has evolved into a

broader concept which, in addition to financial knowledge and numeracy, also takes

account of people’s financial attitudes and behaviour13 to an increased degree. This

broader concept is often referred to as financial capability although, in keeping with the

OECD position14, we have opted to continue using the term financial literacy. With this

change in mind, a key task for the 2011 Adult Financial Literacy in Australia survey was to

incorporate the broader view of financial literacy into the analysis and reporting. This

section of the report describes how we approached this task. It also provides results from

an analysis that sought to identify the aspects of people’s financial knowledge, personal

and household characteristics which are most strongly associated with their level of

financial literacy; and a description of financial literacy levels amongst socio-demographic

subgroups of the Australian population.

A conceptual framework for defining financial literacy

The model shown in Figure 2.2a was used to provide a conceptual framework for this

research.

Figure 2.2a A conceptual framework for financial literacy

12 Schagen, S “The Evaluation of NatWest Face 2 Face with Finance”, NFER, 1997. This definition was adopted from UK

research for international consistency and remains broadly appropriate for the Adult Financial Literacy research program.

13 For example: Personal Finance Research Centre, University of Bristol. Measuring financial capability: an exploratory

study June 2005 and CentiQ, Summary of financial insight among the Dutch May, 2008.

14 OECD. PISA 2012 Financial Literacy Framework (Draft) Dec, 2010 (p7)

This framework draws on the work of the Personal Finance Research Centre15 (PFRC) for

the concept of financial literacy as multi-dimensional (ie: consisting of components such as

keeping track of finances, planning ahead, etc) and both this work and research into

financial insight amongst the Dutch conducted by CentiQ16 in pointing to the value of using

relevant financial behaviours as indicators of a person’s financial literacy.

Broadly, the framework shown in Figure 2.2a suggests that a person’s financial literacy can

be envisaged as consisting of five separate components, each of which can be measured

by behavioural indicators. Financial literacy, as we have defined it, is comprised of the five

components keeping track of finances, planning ahead, choosing financial products, staying

informed and financial control. In this we have drawn on the nomenclature used by the

PFRC, although in place of making ends meet (what the PFRC research considered to be a

sub-component of money management) we have the component financial control. We

have also used different survey questions to measure each of these components of

financial literacy. Thus, while we have used the PFRC work as a valuable guide to

structuring our thinking about the topic, our approach does diverge to some extent both

conceptually and particularly in the specific data items we have used.

In summary form and as shown in Figure 2.2a, the components of financial literacy and the

sorts of behavioural indicators we have used to define them are:

􀀁 Keeping track of finances, for example behaviours like monitoring account

statements and monitoring of household expenses;

􀀁 Planning ahead, which includes behaviours such as addressing retirement income

issues, using financial advisers and using insurance;

􀀁 Choosing financial products; for example the extent to which people engage in

comparison shopping when obtaining financial products and services;

􀀁 Staying informed, for example the extent to which people make use of financial

information; and

􀀁 Financial control which includes things like people’s control of their general financial

situation and debt as well as their ability to save money.

It should also be noted that the framework implies the five components of financial literacy

are potentially influenced by people’s personal characteristics (ie: their financial

knowledge/numeracy, socio-demographics and financial attitudes) as well as the

characteristics of the household in which they live.

Operationalising the model

Figure 2.2a also notes which data items were used to measure the various components of

the model. In looking at these it is fairly clear how most might be used to investigate their

association with the components of financial literacy. For example a variable such as

‘gender’ requires us to look at the extent to which scores on keeping track of finances,

planning ahead and so on differ between males and females.

However, this is less clear for other data items, particularly those we have referred to as

‘financial knowledge/numeracy’ and ‘attitudes towards financial issues’; a brief explanation

of how these were handled is likely to be useful when considering the findings presented in

the next section. Thus:

􀀁 To facilitate subsequent analysis, a number of variables were combined into a

single summary measure of people’s financial knowledge and numeracy. This

involved calculating a financial knowledge score for each respondent based on

their responses to 21 of the survey questions (including the arithmetic quiz

questions). Points were allocated (or deducted) according to the responses given

and a financial knowledge/numeracy score was created for each respondent (a

more detailed explanation of this process is provided in Appendix 1).

15 Personal Finance Research Centre, University of Bristol. Measuring financial capability: an exploratory study June 2005

16 CentiQ, Summary of financial insight among the Dutch May, 2008.

􀀁 In the survey, 16 separate questions were used to assess people’s financial

attitudes. However further analysis suggested these could be reduced to the four

general attitudinal themes of financial self-efficacy (a reflection of people’s self-belief

in their ability to change their financial situation and effectively plan their

financial future), finding money dealing stressful, risk taking (associated with a

propensity for risk-taking in financial matters, a preference for credit use and an

interest in impressing others with purchases) and a thrifty financial orientation

(associated with a focus on saving and a reluctance to spend other than on

necessities). Further details of these measures are provided in Appendix 1.

Finally it should be noted that, for analysis purposes, the behavioural indicators of financial

literacy were combined to form a single index for each component. For example, a

keeping track of finances score was created for each respondent based on their answers to

questions about checking of account statements and monitoring of household expenses

(see Appendix 1 for further details).

2.3 Characteristics associated with financial literacy

Following the re-structuring of the data described in the previous section, five regression

analyses were used to investigate associations between the potential influencing

characteristics shown on the left hand side of Figure 2.2a and the five components of

financial literacy shown on the right (Appendix 1 provides further details of these analyses).

In particular, these analyses sought to establish which characteristics were most strongly

associated with each component of financial literacy.

A summary of the results is provided in Table 2.3a. The characteristics most strongly

associated with each financial literacy component are shown by the use of ‘+++’ (for a

strong positive association) or ‘---‘ (for a strong negative association) in the appropriate

column. Those with less association are indicated with ‘++’ or ‘- -‘ while those with less

again (although still statistically significant) are denoted as ‘+’ or ‘-‘.

Table 2.3a Characteristics associated with components of Financial Literacy

Keeping

Track of

Finances

Planning

Ahead

Choosing

Financial

Products

Staying

Informed

Financial

Control

Financial Knowledge/Numeracy

++ + +++ ++

18-24 yrs

25-34 yrs ++ ++ +++

35-44 yrs ++ +++ +++ +

45-54 yrs +++ +++ +++ ++

55-64 yrs +++ +++ +++ +++

65+ y rs +++ +++ +++ +++

Female ++

Post-secondary

education

+++ ++

Increasing number of

children at home - -

Ow ns or paying of f car ++ ++

Renting home - - - -

Internet user/ ever used

online site to compare

f inancial products

++

In paid employment

Occupation: Upper White

collar

++

Occupation: Low er Blue

collar - -

Household income level - + ++

Total savings/investments

and superannuation

++ +++ ++

Total debt - - -

Financial self ef f icacy ++ ++ ++ +++ ++

Money dealing is s tressf ul - - - - - - - - -

Risk taking - - ++ -

Thrif ty ++ ++ ++ ++

Financial Attitudes

Characteristics Associated with

Components of Financial Literacy

Financial Literacy Components

Socio-demographics

Household

circumstances

Occupation & income

Assets & debt

Important notes concerning regression results: The above table reports the results of five regression models – one for

component of Financial Literacy. The variables listed on the left are those that have a statistically significant association

with one or more components of Financial Literacy. The strength of these associations is shown symbolically by the use of

‘+’ and ‘-‘ signs; the more symbols used the stronger the association (based on scores generated from the standardised

regression coefficients in each model). The sign (+ or -) shows the direction of the association; for example, as an

individual’s “financial self-efficacy” increases, the +++ symbol shows that the Staying Informed Index also increases.

Key points in Table 2.3a include the following:

􀀁 The characteristics most strongly associated with a person’s score on Keeping

Track of Finances are their age, their level of financial knowledge/numeracy, their

gender and their financial attitudes. That is, people tend to monitor their finances

more closely as they get older, particularly if they have relatively high levels of

financial knowledge and numeracy, confidence in their ability to affect their financial

situation and a generally thrifty attitude.

The table also shows that women tend to have higher scores than men on this

component of financial literacy. A risk taking attitude insofar as finances are

concerned and finding money matters stressful to deal with are associated with

relatively low scores. Slightly below average scores are also associated with

working in a lower blue collar17 occupation and higher levels of household income,

an interesting finding suggesting that those with higher incomes may feel they have

less need to closely monitor their finances.

􀀁 Relatively high scores on Planning Ahead are associated with being 35 years of

age or older; people under 35 years, particularly 18-24 year olds, do not score

especially well here. This seems likely to reflect less exposure to financial products

with a longer term focus (such as mortgages and investments in property, shares

and managed funds) and because retirement planning is unlikely to be a salient

issue at this age.

Apart from age, attitudes also have a role to play with a high level of financial selfefficacy

reflected in relatively high scores on planning ahead. So too do the

presence of assets in the form of savings/investments and superannuation, a motor

vehicle and home ownership (in this case those who are renting their home tend to

have lower scores). Notably, financial knowledge/numeracy was only weakly

associated with higher scores on planning ahead.

􀀁 Higher scores on Choosing Financial Products are also strongly associated with

age, with 18-24 year olds not scoring particularly well on this component. Financial

knowledge/numeracy is the other characteristic strongly associated with a person’s

score on Choosing Financial Products; that is a higher level of financial

knowledge/numeracy tends to be associated with more extensive search behaviour

when looking to obtain a new financial product or service.

Completion of formal post-secondary education, financial attitudes (financial selfefficacy,

a thrifty orientation and not finding money dealings stressful) and assets

(motor vehicle ownership) also show relatively strong associations with people’s

scores on this component of financial literacy.

􀀁 Staying Informed is most strongly associated with being 55 years of age or older,

(that is being either close to or in retirement and therefore at an age where staying

informed about financial matters seems likely to be of particular relevance), the

amount of money held in savings, investments and superannuation (the greater the

value of these holdings the higher the score on staying informed) and financial selfefficacy.

More modest associations are evident with financial knowledge/numeracy, upper

white collar occupations18, use of online sites for comparing financial products, a

thrifty financial attitude, not finding money dealings stressful and a risk taking

attitude. While this latter result may be slightly unexpected, it should be kept in

mind that a wide range of people have relatively high scores on the risk taking

attitude including those with higher incomes and significant levels of investments;

that is, the type of people who might be expected to take some interest in staying

informed about financial issues.

17 Major groups 7 (Machinery Operators and Drivers) and 8 (Labourers) in the Australian Bureau of Statistics Australian

and New Zealand Standard Classification of Occupations (ANZSCO). ABS Catalogue No 1221.0.

18 ANZSCO Major groups 1 (Managers) and 2 (Professionals).

􀀁 Low scores on Financial Control were associated with high levels of debt and a

tendency to find dealing with money matters stressful. Also associated with lower

scores, albeit at a more moderate level, were the number of children living at home

(the more resident children the lower the score), living in rental accommodation and

having a risk taking attitude.

Financial self-efficacy, a thrifty financial attitude and higher levels of savings,

investments and superannuation were moderately associated with higher scores on

financial control.

Higher household income was also associated with higher scores on this

component. However, the analysis suggests that debt has more influence on the

extent to which people feel in control of their financial situation than does income;

that is, it is the level of income and of debt that matters when deciding if a person is

in control of their finances or not. Attention has been drawn to this issue elsewhere

in the report (eg: Section 6.6.1) where we note that more than one in three people

who have a mortgage in excess of $300,000 and a household income of $65,000 or

less feel uncomfortable with their current level of debt. This contrasts with a much

lower proportion of 19% who feel uncomfortable with their current debt amongst

people with a mortgage of more than $300,000 and a household income of

$150,000 or more.

There appears to be little role for financial knowledge/numeracy on this component

of financial literacy.

Overall, this analysis highlights the strong associations between people’s attitudes and the

behavioural indicators of financial literacy, the importance of age and the more variable role

played by other characteristics such as financial knowledge, numeracy and sociodemographics.

2.4 The distribution of financial literacy within the population

This section considers the extent to which financial literacy varies between sociodemographic subgroups of the Australian population. Attention is given to subgroups based on age, gender, educational attainment, use of a language other than English

(LOTE), Aboriginal and Torres Strait Islander (ATSI) background19, place of residence,

occupation, main activity, income, assets and debt.

To some degree attention has already been drawn to these subgroups in the preceding

section where strong associations were identified between the components of financial

literacy and variables such as age, gender and educational attainment. However, this

section provides an overview of all the key socio-demographic subgroups considered in this

survey and their relative performance on the various components of financial literacy.

Financial literacy and age/gender based subgroups

Table 2.4a summarises financial literacy for subgroups based on respondents’ age and

gender. Relatively strong or weak performance on each component of financial literacy is

shown by the use of ‘􀀂 ’ and ‘􀀁 ’ symbols. These symbols are used where scores show a

statistically significant difference from the population average. Where scores are well

above or below the population average the symbols ‘􀀂 􀀂 ’ and ‘􀀁 􀀁 ‘ have been used20.

Table 2.4a Financial Literacy and age/gender subgroups

Financial Literacy and demographic/

geographic subgroups

Keeping

Track of

Finances

Planning

Ahead

Choosing

Financial

Products

Staying

Informed

Financial

Control

Age group

18-24 years 􀀁 􀀁􀀁 􀀁 􀀁

25-34 years 􀀁 􀀁 􀀂

35-44 years 􀀂 􀀂 􀀁

45-54 years 􀀂 􀀂 􀀂 􀀁

55-64 years 􀀂 􀀂􀀂 􀀂 􀀂

65 years or over 􀀂 􀀂 􀀁 􀀂􀀂

Age by Gender

M ales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 􀀁 􀀂 􀀂

18-24 years 􀀁 􀀁􀀁 􀀁

25-34 years 􀀁 􀀂

35-44 years 􀀂 􀀂

45-54 years 􀀂 􀀂 􀀂

55-64 years 􀀂 􀀂 􀀂 􀀂

65 years or over 􀀂 􀀂 􀀁 􀀂 􀀂

Females . . . . . . . . . . . . . . . . . . . . . . . . . . . 􀀂 􀀁 􀀁

18-24 years 􀀁 􀀁􀀁 􀀁 􀀁

25-34 years 􀀁 􀀁 􀀁

35-44 years 􀀂 􀀁

45-54 years 􀀂 􀀂 􀀁

55-64 years 􀀂 􀀂 􀀂 􀀂

65 years or over 􀀂 􀀂 􀀁 􀀁 􀀂

Financial Literacy Components

19 Results are based on a relatively small number of interviews (n=72) and should be treated with caution.

20 Arbitrarily two arrows have been used where the difference between the subgroup and total sample means is at least 10

times the standard error of the subgroup mean.

As shown, there is considerable variation across the components. For example:

􀀁 Those aged 65 years or more score particularly well on financial control while

having slightly below average scores on choosing financial products.

􀀁 18-24 year olds have below average scores on most of these components with

especially low scores on planning ahead.

􀀁 There were a few differences between males and females with females scoring

slightly higher on keeping track of finances and slightly lower on staying informed

and financial control. However, it is noteworthy that while females overall did not

score particularly well on financial control, this did not apply to older women;

females aged 55 years or above performed better than average on this component

of financial literacy.

􀀁 When results are considered for particular components, groups with well above

average scores include those aged 55-64 years on planning ahead and people

aged 65 years or over on financial control.

Financial literacy and education, geographic location and type of household

As shown in Table 2.4b:

􀀁 Those who have completed formal post-secondary education have higher scores

on all components of financial literacy with those holding a university degree having

a particularly strong result on staying informed. By contrast, those whose formal

education did not go beyond Year 12 have slightly below average scores on all the

financial literacy components.

􀀁 Those from Aboriginal and Torres Strait Islander backgrounds had slightly lower

scores on all indices except staying informed and keeping track of finances while

people from households using a language other than English had slightly below

average scores on planning ahead.

􀀁 People living outside Australia’s capital cities had lower scores on staying informed

and financial control while residents of the ARIA21 classification major cities had

above average scores on choosing financial products, staying informed and

financial control.

􀀁 Variations associated with household type included high scores on planning ahead

in two-person households and low scores amongst those living in shared

households (typically younger people who, as shown in Table 2.4a, do not score

well on this component); higher scores on financial control amongst those either

living alone or with a partner only. Single parents had slightly below average

scores on all components except keeping track of finances and choosing financial

products while couples with children had above average scores on all components

except financial control.

21 ARIA (Accessibility/Remoteness Index of Australia) is an ABS classification based on the premise that remoteness is a

factor of the relative distance one must travel to access a full range of services. ARIA measures the remoteness of a point

based on road distances to the nearest ABS defined Urban Centre. ARIA scores provide the basis for the Australian

Standard Geographical Classification remoteness structure. For examples see Appendix Two.

Table 2.4b Financial Literacy and education, cultural background, geography and type of household

Financial Literacy and demographic/geographic subgroups

Keeping

Track of

Finances

Planning

Ahead

Choosing

Financial

Products

Staying

Informed

Financial

Control

Highest level of education completed

Year 10 or less 􀀁 􀀁 􀀁 􀀁

Year 11/12 􀀁 􀀁 􀀁 􀀁 􀀁

Trade/TAFE/Diploma 􀀂 􀀂 􀀂

University 􀀂 􀀂 􀀂􀀂 􀀂

Cultural background

Speak language other than English at home 􀀁

ATSI background 􀀁 􀀁 􀀁

Geographic - place of residence

Capital city 􀀁 􀀂

Non-capital city 􀀂 􀀁 􀀁

ARIA classification

Major cities 􀀂 􀀂 􀀂

Inner regional 􀀁 􀀁

Outer regional 􀀂

Remote/Very remote areas 􀀁

Household Type

Single live alone 􀀁 􀀁 􀀁 􀀂

Couple, no resident children 􀀂 􀀂􀀂 􀀂 􀀂

Single parent 􀀁 􀀁 􀀁

Couple, with resident children 􀀂 􀀂 􀀂 􀀁

Single, shared household 􀀁 􀀁􀀁 􀀁 􀀁

Financial Literacy Components

Financial literacy and socio-economic characteristics

Tables 2.4c and 2.4d examine financial literacy across a number of selected socioeconomic

indicators. From Table 2.4c it can be seen:

􀀁 There is an association between living in areas of least socio-economic

disadvantage (SEIFA22 group 5) and slightly above average scores on most

financial literacy components. The distribution of lower financial literacy scores is

less clear-cut although those living in areas of greatest socio-economic

disadvantage (SEIFA group 1) do have slightly lower scores on planning ahead and

choosing financial products.

􀀁 Those working in upper white collar occupations have above average scores on all

components except keeping track of finances. By contrast, people working in lower

blue collar occupations exhibit below average scores on all components except

choosing financial products.

Table 2.4c Financial Literacy, disadvantage and employment

Financial Literacy and socio-economic

subgroups

Keeping

Track of

Finances

Planning

Ahead

Choosing

Financial

Products

Staying

Informed

Financial

Control

SEIFA group 1 (greatest disadvantage) 􀀁 􀀁

SEIFA group 2 􀀂 􀀁

SEIFA group 3 􀀁 􀀁 􀀁

SEIFA group 4

SEIFA group 5 (least disadvantage) 􀀂 􀀂 􀀂 􀀂

Current occupation type

Upper white collar 􀀂

 

Card repayment experiences

For the first time in the 2011 survey, all those holding a credit or store card were asked a

series of short questions relating to repayment behaviour and the use of cash advances on

their main credit card. Results are shown in Table 6.4.1b:

Just over two-thirds of Cardholders (69%) claimed that, during the last 12 months

they had always paid their main card balance in full. This figure appears to be an

over-estimate

The Social Research Centre

28

, possibly a reflection of recall difficulties given the 12 month time

frame. The incidence of this behaviour was well above average (at 80%) amongst

people aged 60 years or over.

Twenty-three percent had been charged interest on their card balance in some

months, most often single parents with household incomes of $65,000 or less

(48%) and those people holding mortgages of $300,000 or more but earning

household incomes of $65,000 or less (50%); 13% of Cardholders had only made

the minimum repayment on at least one occasion; while 18% were charged a late

payment fee at least once. These latter two experiences were more prevalent

amongst the same high mortgage/moderate income group who had also been

charged interest on their cards. Single parents however were no more likely than

the average Cardholder to have been charged a late payment fee.

Eight percent of these Cardholders had been charged a fee for exceeding their

credit limit, particularly those working in lower blue collar occupations (19%); and

Twelve percent had sometimes used their card to take a cash advance, again

those working in lower blue collar occupations (23%), as well as single parents

(19%), particularly those single parents with household incomes of $65,000 or less

(25%).

Table 6.4.1b Credit/Store card repayment patterns

Credit/Store Card Repayment Experiences 2011

Which of the following describes your experience with your main credit

card during the last 12 months?

Base: Have credit or store card (n=2576)

I al ways pai d my credi t card bal ance in ful l . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69

In some months I carried over the balance and was charged interest . .

23

In some months I only made the minimum payment . . . . . . . . . . . . . . . . .

13

In some months I was charged a fee for late payment . . . . . . . . . . . . . . . . . . .

18

In some months I was charged a fee for exceeding the credit limit . . . . . . . .

In s ome months I used the card for a cash advance . . . . . . . . . . . . . . . . . . . .

12

Prompted questi on; asked for the fi rst ti me in 2011

28

Data from Roy Morgan Research suggests that 51% of credit Cardholders pay their card off in full each month

(12 months to August, 2011; Australian population aged 18 years or over)