Lack of financial literacy a ‘vicious cycle’ as advice becomes more unaffordable for Australians

News this week that more than one-third of Australians are financially illiterate will only hurt those seeking professional advice, according to Lifespan Financial Planning CEO, Eugene Ardino.

Mr Ardino told ifa this week that the research — which found that just 66 per cent of Australians can be classed as financially literate — is “not a major surprise”.

In fact, lead author of the report, University of Newcastle Business School researcher from the College of Human and Social Futures, Professor Christina Boedker, noted that only around one in four people answered all five financial literacy questions correctly.

“As our financial lives become even more complicated and technology advancements have increased, access to financial products ranging from credit cards, buy-now-pay later, crypto, direct shares and much more, it has never been more important to take meaningful steps to addressing poor financial literacy,” Mr Ardino said.

“Unfortunately, it becomes a vicious cycle, as financial advice becomes more unaffordable to most Australians. Generally, those that seek financial advice tend to be more financially literate and tend to make better financial decisions.”

In particular, the head of the advice network noted a statistic from the report, released by the University of Newcastle and Greater Bank, which found that around 43 per cent of young people aged 18 to 24 years reported that they could not meet their personal debt obligations.

Mr Ardino said that those who have the greatest need for financial literacy education are those least likely to access financial advice.

To curb this, Mr Ardino has advocated that financial literacy be taught in schools as a subject within the core curriculum from “at least from the beginning of high school through to the senior years”.

“It is not simply the responsibility of the banks to provide this financial education. As a financial services industry, we all have a significant role to play,” he said.

“Many advisers are currently involved in financial literacy programs in school. Government and associations need to work closely together to take steps towards finally implementing a program, that, to be honest, is in the best interests of everybody.

“Educated financial citizens are more likely to seek financial advice and make good financial choices. They are better informed, and more likely to invest more broadly across the financial services system.”

Mr Ardino previously called on the federal government to launch a campaign aimed at raising financial literacy awareness for younger people, during an episode of the ifa Show podcast late last year.

“Try to have more of that within schooling perhaps, so that when people get out there and they have to make financial decisions and have to engage people to help them to do that, they’re doing it with a bit more awareness,” Mr Ardino said on an episode of the ifa Show.

“There’s nothing better than dealing with a client who understands what you're talking about.”

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.