Report Explores Financial Wellbeing in Australia
28 September 2017 at 12:03 pm
A new report reveals what financial well being in Australia is about, and it appears to be more than just finances.
The project, commissioned by Financial Literacy Australia, looked at financial well-being in the Australian context to provide a definition aimed at Australians of different ages, and to be useful to organisations that work to improve financial outcomes.
“Financial well-being isn’t just about people’s financial situations,” the report, released by the Centre for Social Impact (CSI) and the Social Policy Research Centre (SPRC) at UNSW Sydney for Financial Literacy Australia, found.
The report, called Exploring Financial Wellbeing in the Australian Context, found that according to the lived experience of people across Australia, there are three interrelated dimensions that make up financial wellbeing; meeting expenses and having some money left over; being in control of finances; and feeling financially secure.
“It’s about having enough money to meet expenses, but also about having spare cash to make choices, feeling in control of your financial situation, and whether or not you worry about money,” the report said.
It said that financial well being was not just determined by how people were faring in the three dimensions now, but also how they were setting up for and feeling about the future.
“The report provides the foundation for the future development of a framework to guide practitioners in refining, innovating, and collaborating on improving financial well being outcomes for Australians. It starts the journey towards a shared understanding of what financial well being looks like, how it can be improved, and how it can be measured,” it said.
The research also showed what influenced financial well being and highlighted the connections between these influences.
Professor Kristy Muir, CEO of CSI and lead author, said that a person can be stronger or weaker in a particular area, but the overall result was important.
“All three dimensions, when assessed together, give us a really clear understanding of an individual’s financial well-being,” Muir said.
“This is particularly important when we know that household debt levels are high, and one in five Australians cannot or do not know if they can raise $2,000 in an emergency.
“We know that over two-thirds of Australians feel some level of financial stress and around one in eight experience high levels of financial vulnerability. A better understanding of financial well-being could help to better tailor appropriate products, services, and supports to improve outcomes for Australians, and the economy.”
The report also explored the potential influencers of financial wellbeing, the strongest of which were financial capability, personal health, financial inclusion, social capital, and income.
It found that life events, the ability to respond to financial shocks, and household, community, and societal contexts also all played crucial roles.
Co-author Dr Myra Hamilton from the SPRC said it should be noted that well being in this context was not fixed.
“As we would expect, a person’s financial well-being is not just a feature of their circumstances in the present. It is also shaped by their past circumstances and their aspirations for the future,” Hamilton said.
Robert Drake, general manager at Financial Literacy Australia, said the findings were important in helping financial service organisations to further develop their offerings to help promote and improve the financial well being of Australians.
“The report gives us a unique insight into what constitutes financial well-being, and importantly shows us where we can work to help people,” Drake said.
“Financial service organisations, for example, can ensure that financial products and services are appropriate, affordable, tailored and accessible; financial educators and counsellors can focus on the aspects of people’s lives that can be controlled; and governments can help regulate the financial services sector.”
The research team also developed the Financial Wellbeing Tree which showed the factors and influencers that played a role in determining a person’s financial well-being.