LIFTING AUSTRALIA'S FINANCIAL LITERACY STANDARDS
The Australian Financial Literacy Foundation reports that more than a third of women said that dealing with money was “stressful and overwhelming”, and less than half of women surveyed (46%) had a financial plan of their own in place for the next 3-5 years.
Unfortunately, women often face a more precarious financial future to men. The 19% gender pay gap translates to a 47% superannuation gap when women retire - which is a difference on average of $90,000 over an individual’s earning life.
High schools teach calculus, algebra, and geometry. Universities teach theoretical maths, unreal numbers, and the physics of the universe. You wouldn’t believe how many young people I’ve met who would toss all that out the window for a single course on personal finance that was widely available and easy to understand.
Financial literacy can be exhausting to someone who doesn’t enjoy it - complex, hard to find help, and hard to know the right choice to make. But it matters. Knowing how to manage your money, your credit and debt, can pay you back years down the line. More-important still, it gives you financial independence.
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WE HAVE TO START SOMEWHERE
Have a look at Forbes’ global financial literacy test. Australia is ranked ninth, with 64% of the population judged as being relatively financially literate – still fewer than two thirds of our population. Even the highest-ranked countries barely cross 70% (and surprise, surprise, they’re in Scandinavia). That was in 2014, and I doubt much has improved since then.
The earlier you become financially literate, the more profound the impact will be on your life.
We need to start teaching money management in schools, perhaps as early as when we start teaching basic maths. A study from the TIAA Institute shows that people who have a high degree of financial literacy are more likely to plan for retirement, and can end up having more than double the wealth of people who don’t.
INFE (International Network on Financial Education) gathers data from 240 public institutions in over 100 countries. Women live longer than men, yet have shorter working lives, lower average incomes, make more domestic and life-based financial decisions, and have a lower rate of financial literacy to manage greater financial risks. I’d love to see more financial literacy courses directed at women in particular.
Competence saves money (that you can invest elsewhere). Ignorance costs.
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But where?
The younger you are when you start setting up a good credit history, the more likely it is that banks will trust you when it comes to loans for houses and cars. This starts with having a credit card and using it responsibly, being on the lease for a rented property, or having a mobile phone under a plan. For women, it could even mean having separate finances from partners.
You might also consider:
- Signing up for online budgeting tools to keep track of where your money is going
- Making an appointment with an experienced financial advisor (make sure they are on the government’s register of licensed financial service providers)
- Newspapers and magazines geared toward money matters
- Reaching out to your network, especially if you are a small business owner - there will be others who have been through what you’ve been through
Being financially literate doesn’t mean you have to know how to play the stock market. If you hire someone to do your tax or manage your accounts, that’s not a problem, but understanding what they’re doing with your money is essential. Never trust anyone who doesn’t want to take the time to explain everything to you properly.
Financial intelligence compounds just like money. The more you know, the more you understand, the easier the next piece of information will come to you.
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The why: PEACE OF MIND AND PERSONAL INDEPENDENCE
Financial literacy is one of the best investments you can make in yourself. An education is something no one can ever take away from you, and a financial education in particular can help you protect yourself - to avoid unnecessary losses and give you peace of mind.
Financial protection can come in many forms. Firstly, it’s important to protect your financial accounts. ‘Sexually transmitted debt’ is an issue I’ve seen many people deal with, as they have inadvertently become responsible for debts created by their partner or former partners.
Establishing your own email address, credit card and private bank account is vital, no matter how committed a relationship you are in. Better yet, put something from each pay cheque into that private account, and it’s not a bad idea if that account is not with your main bank.
It’s also vital to protect your income, and business if self-employed or if you own your own company. Being a company director, even of a not-for-profit, carries risks and you should consider Directors and Officers (D&O) insurance that provides you with the correct cover. If life throws you a curve-ball, you need to have your income and indemnity protected.
Read more: Why you need D&O insurance
FINAL TIPS
Being financially savvy doesn’t come easily for everyone, but if there is one piece of advice I could give, it’s to look after yourself first. If you’re not living the life you want, find ways to change. You are your own best asset, and your education, career, and life should benefit you.
A few key ways to do that, from myself and the online financial empowerment community The Wolfpack are:
- Understand the difference between wanting something and needing something
- One size doesn’t fit all. Your circumstances are going to be different from your siblings, your children, your best friend, your accountant. Don’t assume that what works even for your significant other is going to work best for you
- Long-term financial plans sounds scary, but any plan can be as simple as setting aside as little as $5 each week. Compound interest is your friend: it’s stunning how fast that money will build up
- With job-mobility at an all time high, it’s important to keep all your superannuation in one place
If you are inspired and would like to join the revolutionary movement that Imalia is creating, you can request to join our Facebook group The Wolfpack, to share ideas and learn from other like-minded women.
This is an edited version of a blog that first appeared on LinkedIn.