One-third of Australians are financially illiterate

According to the latest Econosights report from AMP deputy chief economist Diana Mousina, Australia needs to improve its financial literacy standards.

The report also highlighted the significant gap in financial literacy levels between men and women, with women also facing lower levels of income and smaller superannuation balances.

The Econosights report examines the relationship between financial literacy and retirement savings by analysing market research and date, finding that more than one-third (36 per cent) of adults in Australia are financially illiterate. This is more than countries such as Germany (34 per cent), the UK (33 per cent), and Norway (29 per cent).

It also found that while there is a financial literacy gap between men and women globally, the gap is larger for Australia then some of its global peers.

The gap between adult male and female financial literacy in Australia is 8 per cent, which is greater than the gap in Italy (7 per cent), Germany (6 per cent), the US (5 per cent), and China (1 per cent).

“Despite having one of the highest GDPs and average wealth per household, millions of Australians remain financially illiterate, with women well behind men,” Ms Mousina said.

“Lifting levels of financial literacy and closing this gender gap are important challenges for our society and would improve retirement outcomes for many.

“Underlining the importance of lifting literacy for women is that their superannuation balances remain well below men at all ages, compounded by the fact that they generally earn less than their male counterparts.

“Improving financial literacy across our community requires a coordinated approach from government, schools, financial institutions, and parents. This includes more dedicated grassroots financial literacy tuition in schools and systems that encourage more girls and women to study financial-related subjects and courses.

“Broader take-up of paid parental leave measures which enable both parents to take time out of the workforce will also help reduce the superannuation gap.”

The Econosights report also examined how the financial literacy gender gap can impact the retirement savings of Australian men and women.

The average superannuation balance at age 60–64 for men sits at $406,000, compared with $321,000 for women – a 21 per cent drop. Women’s wages also lag men, which contributes to lower retirement balances and is made worse by the financial literacy gap.

According to Ms Mousina, the implementation of measures from the Quality of Advice Review should help make affordable financial advice more accessible.

“Financial services organisations also have a broader role to play in providing their customers with access to simple and intuitive information which helps them understand and engage more with their mortgages, investments, superannuation and retirement planning,” she said.

“Parents can then share their knowledge with their children to build their financial awareness and understanding at a young age.”