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Improving the financial literacy of Australians
Some of the most important decisions we make in life concern our personal finances.
As a member of parliament I have come across some heartbreaking examples of people suffering very serious consequences when a personal investment decision has gone wrong. A number of my constituents were affected by the collapse of Trio Capital several years ago – losing retirement savings of several hundred thousand dollars or more. Other high profile financial collapses – such as Storm Financial – have seen financially unsophisticated Australians put into unsuitable, highly risky structures, typically involving redrawing money on a home mortgage to invest in shares.
The more we can improve the financial literacy of Australians, the more likely it is that people will be able to read the danger signals and avoid these highly risky – and in some cases outright fraudulent – ‘investment opportunities.’
Of course, avoiding danger is only one benefit of being financially literate. Another is making better decisions about the many financial choices that we all face very day. Should I take a cash advance on my credit card? If I have a windfall, should I buy shares or should I put the money into repaying my mortgage? If I have money in superannuation, how should I allocate that money between the major investment classes of cash, fixed interest, property and equities?
Improving the financial literacy of Australians is an important priority for the Australian government. More than a decade ago, the National Financial Literacy Strategy was launched - aiming to bring together a range of Government departments and community groups to improve the financial literacy to all Australians.
The strategy has five key components:
- Educating the next generation – through professional development programs for teachers, school engagements, student participation and teacher awards;
- Information, tools and resources – through financial guidance, workplace financial literacy and financial education;
- Targeted guidance and support – through support services, microfinance programs and matched savings programs;
- Co-ordination and partnerships – through the National Financial Literacy Network and financial literacy awards; and
- Research, measurement and evaluation – through national surveys and financial literacy grants.
The cornerstone of the program is ASIC’s MoneySmart website, which offers a large amount of information to help Australians manage their money more efficiently.
Whether you’re looking at buying your first home, setting up a business or even planning on getting a dog, the MoneySmart website can assist by providing you with the real costs, common pitfalls and expert advice that could cost thousands.
The website also sorts information relevant to whatever stage of life you’re at. If you’re under 25, over 55, a young family or an indigenous Australian, there’s information specifically tailored for you.
Importantly, there are also calculators available which can assist you when planning those big financial decisions. There are calculators to help you if you are preparing a budget, looking at getting your credit cards under control, hoping to get a mortgage or planning for retirement.
And the best thing is that the information is completely independent, so there’s no risk of your details falling into the wrong hands.
The National Financial Literacy Strategy has a pretty ambitious goal: to achieve long term behavioural change, including through encouraging Australians to take positive steps to improve their financial circumstances and through educating young Australians to be financially smarter.
It is really important work – and it might just help you or someone you know. Head to www.moneysmart.gov.au to find out more.