Unless you’re taking the ‘ignorance is bliss’ approach to your savings, you probably know exactly how much you have (or approximately have) sitting in your bank account.
You’re probably aware of when your next bill is due and even more aware of when payday is.
However, no matter how on top of your finances you think you are, when it comes to getting ahead, financial literacy plays a big (read: huge) ongoing role.
If you’re looking to sharpen your finance knowledge, be sure to check out Bauer’s Financially Fit Females hub.
What is financial literacy?
More than just knowing what superannuation fund you belong to, financial literacy is a thorough understanding of money that helps you to navigate the way you spend and save.
According to the OECD International Network on Financial Education, financial literacy is ‘a combination of awareness, knowledge, skill, attitude and behaviours necessary to make sound financial decisions and ultimately achieve individual financial wellbeing’.
Why it’s important to be ‘financially literate’
If you don’t feel particularly clued-in on topics of finance, you’re not alone.
Only 40 per cent of Australian high schools now offer economics as a subject compared to more than 90 per cent back in the early 1990s, dropping from the third most popular year 12 subject to the 22nd (in 2017).
For women, a lack of financial literacy has shown cause for concern. A recent study by the Australian Securities and Investments Commission (ASIC) revealed that around 41 per cent of women find “dealing with money stressful and overwhelming”.
On average, women retire with half the super balance of men ($230,907 versus $454,221). With 85 per cent of women under 35 not understanding the fundamental investment concepts, financial literacy has never been more important.
For women to feel empowered enough to bargain and deal with banks and other financial institutions, financial literacy is a must.
Am I financially literate?
Every year the Household, Income and Labour Dynamics in Australia (HILDA) Survey looks at 17,000 Australians’ lives and collects information which in turn can be used to inform public policy.
In 2018, the HILDA survey included a five-question quiz that looked at Australians’ financial literacy, with key areas including: numeracy, inflation, portfolio diversification, risk versus returns and money illusion.
Less than 50 per cent of those who completed the quiz answered every question correctly. HILDA found a correlation between scores and certain financial attitudes, financial behaviours and economic outcomes, and showed that those who scored high (answered all five questions correctly) most commonly had a higher income and net worth, were future-orientated and premeditative (as opposed to impulsive) and saved regularly each month.
See the full results, here.
In their conclusions, HILDA found financial literacy to play an important ongoing role in achieving financial goals.
Take the quiz and see how you compare:
To compare your results with those who participated in the HILDA survey, click here.
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