Aussies' financial literacy declines, young people fare the worst

Despite many initiatives, financial literacy, capability, and wellbeing levels have dropped in Australia, according to research commissioned by Ecstra Foundation and conducted by SVA Consulting.

The International approaches to progressing financial capability report Ecstra commissioned said that financial literacy levels in Australia have fallen across all demographics, with 15-24-year-olds worst off, followed by 25-34-year-olds.

It also noted that the proportion of households experiencing financial stress has increased between 2006-2020. Around one in five households experienced each of two financial stress indicators: 20.7% of households had cash-flow problems and 18.7% of households couldn't raise $2000 within a week.

Additionally, more than half of Australians are reportedly just making ends meet or failing to do so.

Ecstra chief executive Caroline Stewart said that despite the efforts of many stakeholders focused on financial capability, Australia's financial literacy levels aren't improving.

"There is a risk we could fall behind globally if action is not taken," she said.

"This is particularly concerning against a backdrop of cost-of-living pressures, as Australians are navigating multiple challenges, economic inequality and the continued proliferation of financial scams."

The report, however, said there are many stakeholders working on financial capability and wellbeing in Australia, which provides a strong base for "championing a renewed approach to financial capability."

The report said the key opportunities in the Australian context included - recommitting to a national strategy for financial literacy and capability with concrete goals, lines of accountability, sustainable funding, and clear outcomes measurement.

It suggested mapping stakeholders, initiatives, and funding to better understand the financial capability ecosystem and to identify gaps and opportunities. Convening stakeholders, including community and consumer organisations, educators, academics, peak bodies, philanthropic partners, industry, and government to ensure collaborative action.

Moreover, it recommended ensuring that students have access to quality, evidence-based financial education in all schools across Australia and continuing to engage in international initiatives addressing financial capability.

"National strategies are complex, long-term public policy projects. Given the many drivers of financial capability, the range of players involved and policy intersections, government leadership is critical for setting a clear, unified vision and roadmap," Stewart said.

SVA Consulting director Louise Campbell agreed saying that the role of strong leadership cannot be understated when "the complexity of stakeholder coordination was raised as the greatest challenge across all jurisdictions."

"Clear leadership and effective coordination of activities and policy alignment is a success driver for better financial literacy outcomes," she said.