Financial literacy identified as contributor to financial hardship

While three in four Australians self-identified to have either “good” or “excellent” financial literacy, a growing number are reporting instances of some form of financial hardship, according to new NAB research.

A recent survey conducted by NAB revealed that the number of Australians claiming to have experienced financial hardship in the last three months has risen for the sixth consecutive quarter to 44 per cent.

This was the highest among those aged between 18 and 29 (56 per cent) and trended downwards with age.

Similarly, the greatest financial literacy gap was for women aged between 18 and 29, with almost a third (31 per cent) rating their financial literacy “fair” or “poor”, which is significantly higher than any other group.

Meanwhile, men aged between 50 and 64 and women over 65 years of age had the highest self-reported financial literacy, at 82 per cent and 81 per cent, respectively.

However, NAB’s head of customer vulnerability, Michael Chambers, stressed that regardless of literacy, anyone could be one unexpected life event away from financial hardship.

“While NAB customers are broadly in good shape, one in four Australians say they don’t have enough money for an emergency,” Mr Chambers flagged.

As such, he noted that with rising interest rates and increased cost of living, people’s financial literacy and understanding of their financial situation is being tested.

“Financial literacy is about more than being able to put together a budget, it extends to understanding how to manage a credit card to your advantage and being able to figure out the best way to make big purchases happen,” Mr Chambers explained.

“Research shows that people being over-confident in their financial understanding can be just as problematic as not having basic knowledge in the first place.

“The most important thing to remember is there is no such thing as a silly question when it comes to finance.”

According to Mr Chambers, banks have an obligation to communicate concepts to their members in easily understandable language and urged Australians to take advantage of this resource.

“There is also a huge amount of information out there these days from podcasts to online budgeting tools and books – I’ve kicked things off with my kids with ‘The Barefoot Investor for kids’ and it’s been a great start,” he added.

NAB’s leadership has, on several occasions, stressed that the bank has no plans to return to advice.

Asked about the Quality of Advice Review’s (QAR) recommendation to allow banks back into advice in July, chief executive Ross McEwan told the House standing committee on economics that the change in legislation would have to be “dramatic” to “convince” the bank to “go back into that market”.

“I have no plans to do so at this point in time,” Mr McEwan said.

“We’re out of that space.”

Similarly, on an episode of the ifa show, Adam Holster, professional services banking executive at NAB, said that he is “focused on supporting our advisory customers and clients” with growing their business in a way that supports their ambitions and goals.

“We’re just in such a privileged position to be able to support these growing businesses that are working in the best interests of their clients,” he told ifa.

To hear more from Mr Holster, click here.