Aussies struggle to make basic money decisions
Millions of Australians feel unfit to make financial decisions during times of uncertainty as the lack of financial literacy begins to take its toll.
New research from Finder has found one in three Australians don't feel equipped to make decisions during this period of inflation.
Australia's current inflation rate has risen 6.8% over the year to February but is down from the 7.4% annual rise recorded in January.
It is still near some of the highest levels ever, with levels like this not seen since 1990.
Given the time between high periods, over 16% of Australians have never experienced a period like this before.
Almost one in 10 Australians without access to a financial advisor feel unqualified to make decisions during this period, with 7% having no idea how inflation will impact them and their finances.
Money expert at Finder, Rebecca Pike says its extremely valid to feel unprepared for this period of record inflation.
"A significant number of people, especially those who are younger, will have never experienced times like this before," she says.
Almost half of gen Z feel ill-equipped compared to just 18% of baby boomers and that's exactly what Ecstra is trying to change in Australia.
The organisation is committed to building the financial wellbeing of all Australians and chief executive Caroline Stewart says its mission has never been more vital.
"The data from Finder doesn't surprise me at all, people across Australia are feeling the pinch particularly younger people," she says.
"It really brings home those core elements of if people have the personal knowledge and skills to weather the storm."
Although unfortunately financial literacy is not increasing across any age group and is even worse for those aged between 15-24 says Stewart.
"It's highly possible for a young person to transition from school to further study and into a workplace and not understand things about finance like tax file numbers, super and more," she says.
There's no right or wrong way to go about fixing it says Stewart but there needs to be an effort by all parties to give people the information they need to make key decisions.
"You need government and the education system but there's also a huge role for financial service providers to play, as long as it is in a really transparent way that reduces commercial imperatives," she says.
However, that hasn't always worked in the past, particularly given the Banking Royal Commission which found issues with how financial service institutions provided advice to consumers.
Kane Jackson, founder of fintech Maslow, says the conflict between the best outcomes for the customer and the best outcome for the company needs to be measured.
"Financial service providers do have a role to play in improving financial literacy, but this needs to be provided by those without a vested interest.
"The issue we currently have with large financial institutions providing education is that they have a vested interest in the decision the customer makes," he says.
Jackson says a new business model is needed where that conflict is removed so that advice provided has no vested interest.
"So, stepping back from monetising the customers' decision-making process to provide the best product for customer and you do that by getting customers to pay to access products that have only one intention, which is the best outcome for them," he says.
It's a business model that Jackson is currently building which he says is coming at an interesting time as young people increasingly are questioning capitalism.
"There is a growing movement around social impact ventures for things like climate and sustainability, but we don't talk about it yet for the largest industry in the world, the finance one.
"If we can make the financial industry more of a utility than a source of profit for the top 2-3% then we can give people more financial certainty in an uncertain world," he says.
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