While Australia remains one of the richest nations in the world, a new Econosights report from AMP’s Deputy Chief Economist, Diana Mousina highlights the need to improve financial literacy standards.
The report also highlights the significant gap in financial literacy levels between men and women, with women facing lower levels of income and smaller superannuation balances. Analysing market research and data, the Econosights report examines the relationship between financial literacy and retirement savings. It found that more than one third (36%) of adults in Australia are financially illiterate, more than Germany (34%), the UK (33%) and Norway (29%). Globally, women usually have lower financial literacy compared to men, known as the “financial literacy gender gap”, however in Australia this gap is noticeably higher relative to our global peers. In Australia, the gap between adult male and female financial literacy is 8% which is greater than the gap in Italy (7%), Germany (6%), the US (5%) and China (1%)1.
Financial literacy can affect how you retire
The reportshows the implications of the financial literacy gender gap as applied to the retirement savings of Australian men and women.
Women in Australia retire on smaller superannuation balances than men, with their average superannuation balance at age 60-64 being 21% less than men at the same age – a balance of $406,000 for men compared with $321,000 for women. Women’s wages lag men, contributing to lower retirement balances and this issue is made worse by the financial literacy gap.
Today’s retirees can expect to live another 25 years after retiring, yet a growing number are failing to get the help they need or plan for their savings to last for longer. This can lead to poorer investment decisions, lower wealth accumulation and smaller retirement savings.
Diana Mousina, AMP’s Deputy Chief Economist said:
“Despite having one of the highest GDPs and average wealth per household, millions of Australians remain financially illiterate, with women well behind men.
“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 implementation of measures from the Quality of Advice Review should also 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.”
“Parents can then share their knowledge with their children to build their financial awareness and understanding at a young age.”
Improving literacy for everyday Australians
Findings from AMP’s 2022 Financial Wellness research found one in four women and one in four single parents say they are financially stressed.
The report showed the number of workers severely stressed about their finances (approximately one million Australians) was at record highs, having more than doubled since 2020.
Anxiety levels among Australians have increased, the data shows, due to concerns with cost-of-living pressures, including rising inflation and interest rates.
Financial literacy improves with more knowledge, which is why a greater focus needs to be placed on grassroots initiatives to improve financial awareness and understanding across our community.
Five tips to improve your financial literacy
There are several publicly available resources that can help you raise your understanding of basic investment and financial concepts to help alleviate signs of financial stress:
2) View AMP’s Insights Hub here. You’ll find lots of useful financial tips, tools and news to keep you informed and help achieve your financial goals.
3) Sign up to our two weekly blogs Econosights and Oliver’s Insights here. Shane Oliver’s recent Personal Finance 101 blog shares 15 common sense tips to help manage your finances here.
4) Check out ASIC’s Money Smart website for detailed guides on how to manage your money, reduce your debt and plan for your future.
5) Have a look at AMP’s biennial Financial Wellness report, with important insights around how to improve your financial wellbeing
1 Preston, A. and Wright, R.E. (2023), Gender, Financial Literacy and Pension Savings*. Econ Rec, 99: 58- 83. https://doi.org/10.1111/1475-4932.12708