One in two young Australians aged under 25 do not feel in control of their finances, according to a new report out from financial advisory and accounting firm Findex.
In a survey of 16-24 year olds, Findex found that mum and dad remain the go-to for financial advice for young Australians, with 71 per cent saying they turn to their parents or guardians for support on how to manage their money. This is perhaps unsurprising given the absence of formal financial education, with half of those surveyed (48 per cent) saying they have limited to no recollection of any formal financial education at school.
Young Australians demonstrated aptitude on how to save for medium-term goals, with over half (53 per cent) of respondents identifying the best tactics to save for a big purchase like a new car or long-haul holiday.
However, when asked how they manage their day-to-day finances, they were less likely to practice financially sound behaviours. One in four (25 per cent) said they never or rarely set a budget and only a third (32 per cent) manage their finances by calculating their monthly ingoings and outgoings. Similarly low levels of planning were seen amongst this age group when it came to planning for retirement, with only one in 10 (11 per cent) contributing additional money to their super.
Other gaps in young Australians financial education include:
1 in 4 young Australians (23 per cent) do not know how much their employer should be contributing to their super, meaning they would not recognise if their super is being miscalculated or underpaid
1 in 2 under 25s (47 per cent) were unable to accurately calculate how interest works on investments
Less than half (42 per cent) would consider insurance if they found themselves unexpectedly unable to work.
Findex has launched Young Money: How is Gen Z spending and saving? to coincide with a new ten-part podcast series from the Findex Community Fund, Young Money. Launching in June, weekly episodes of Young Money will share indispensable, everyday knowledge around managing money, and common financial needs for Generation Z.
“Sound financial decision-making is strongly linked with improved financial wellbeing and greater participation in economic life. 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. That’s why it’s essential we do everything we can to educate and empower our communities on how to be smart with their finances,” said Matt Games, Chief Financial Officer for Findex.
“While there are some encouraging signs in the data that younger Australians are financially savvy, there are also some real areas for concern. While half of young Australians feel in control of their finances, this means almost one in two feels in the dark.
“It’s a shame that young people are still reporting that financial education is not featuring on the school syllabus. A heavy reliance on parents and guardians to educate the next generation on financial literacy is misguided and potentially harmful.
“Our data shows young Australians are turning to banks, finance companies or searching online for financial advice to fill in the gaps in their knowledge. Banks and finance companies should take their responsibility as a source of financial advice seriously and ensure they’re providing easily understandable and objective financial guidance.”
Other key findings from the survey include that contrary to a 2014 ASIC study, the gap in financial literacy levels between young people living in different parts of Australia appears to be closing. Findex’s survey found no substantial difference in financial literacy levels between young Australians in rural or regional Australia compared to metropolitan areas.
However, the survey did find a crossover between certain socioeconomic factors correlated and lower levels of financial literacy, namely young people who: are migrants themselves or first-generation Australians; had a long-term health condition or disability while growing up; had a parent who was unemployed for 12 months or more while growing up; or lived in a single parent home while growing up.
“In our pursuit of a successful and fair society, financial literacy must be prioritised as a means to achieving this. While our survey is not conclusive on cause and effect, it is an important reminder that a one-size-fits all approach to financial literacy is not sufficient and that we must consider extra and bespoke support to groups in society who need it most.”
Hosted by Sophie Gay, Young Money podcast guests will include financial literacy campaigner Nicole Pederson-McKinnon. Young Money will be available for download from early June.
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