Financial Literacy

Overview

This month I would like to briefly talk about a topic that is the guiding force behind why I write my monthly educational articles - the topic is financial literacy.

Broadly speaking, financial literacy 'is a combination of financial knowledge, skills, attitudes and behaviours necessary to make sound financial decisions, based on personal circumstances, to improve financial wellbeing'.

Think about the impact its absence and presence has had on your life as you have navigated through the world of finance as an individual, partnership and family unit.

The First Step?

The reality is that financial literacy is an essential everyday life skill and according to ASIC's Australian Financial Attitudes and Behaviour Tracker there are five indicative behaviours of financial literacy:

1. Keeping track of finances: approaches to managing everyday expenses
2. Planning ahead: planning for the medium and longer term, including retirement and beyond
3. Choosing financial products: shopping around, and understanding and assessing investment risk
4. Staying informed: use of information, tools and guidance when needed
5. Financial control: savings behaviour and managing debts.

So how does one exercise themselves in these indicative behaviours? I think the initial answer lies in the wise and powerful words of a great man, "Faith is taking the first step even when you don't see the whole staircase" (Martin Luther King, Jr).

Ultimately, you need ‘financial self-efficacy’ (self-confidence and belief in the ability to make a difference to one’s financial situation) closely followed by an understanding of the skills, knowledge, attitudes that will help you along your financial journey (Vyvyan, Blue & Brimble, 2014). Listed below are several things to consider as factors that will either promote or inhibit your financial capability.

Practical Examples of Applying Your Financial Literacy 

If you are unsure about why financial literacy may be important then I suggest you read some of the articles that I have written in the past where knowing a little more about a given area could possibly help improve your financial situation:

1. Making a purchase i.e. 'First Home Buyers - That 20% Deposit' https://www.dhirubhai.net/pulse/first-home-buyers-20-deposit-chris-wilsmore?trk=mp-reader-card
2. Understanding your finances i.e. 'The Power of Knowing Your Weekly Budget' https://www.dhirubhai.net/pulse/power-knowing-your-weekly-budget-chris-wilsmore?trk=mp-reader-card 
3. And, planning for retirement i.e. 'Retirement Planning @ 25/35/45/55' https://www.dhirubhai.net/pulse/retirement-planning-25354555-chris-wilsmore?trk=mp-reader-card

Conclusion

Over the next couple of days take some time to think about what areas of your financial literacy you would like to improve upon (make a list) such as budgeting, managing debts, personal insurances, home & contents insurance, superannuation, investment diversification. Once the list is complete, believe in yourself, and then go find the answers to your questions through the learning channel that best suits you. For example: 

• online newspapers (e.g. https://www.financy.com.au/; https://www.moneymanagement.com.au/; https://www.corelogic.com.au/news/ etc.)
• informational websites (https://www.moneysmart.gov.au/; https://finlit.org.au/; https://www.financialliteracy.gov.au/)
• seminars (e.g. https://www.humanservices.gov.au/customer/enablers/upcoming-fis-seminars-new-south-wales)
• apps (e.g. financial calculators, budgeting, spending trackers)
• youtube videos, podcasts, magazines, personal finance dictionary etc.
• speak to a trusted professional that works in the finance industry (e.g. accountant, mortgage broker, financial planner etc.) 

Lastly, I leave you with one of my favourite quotes, which I think is pertinent to improving your financial literacy, “No one can reveal to you aught but that which already lies half asleep in the dawning of your knowledge....If they are indeed wise they do not bid you enter the house of wisdom, but rather lead you to the threshold of your own mind...For the vision of one person lends not its wings to another.” (Gibran Khalil Gibran)

This publication provides an overview or summary only and it shouldn't been considered a comprehensive statement on any matter or relied upon as such. This publication doesn't take into account your personal objectives, financial situation or needs. It’s important for you to consider these matters before making any financial decision and I recommend you seek help from a financial adviser. You should seek advice from a qualified taxation adviser when making any decisions about taxation matters.

References

1. ANZ (2011). Survey Of Adult Financial Literacy In Australia.
2. ASIC, Moneysmart website.
3. BT Australian Financial Health Index. (2014). A nationally representative sample of 4,450 Australians aged 18+, looking at their attitudes towards finance, money and retirement.
4. Vyvyan, Victoria; Blue, Levon; and Brimble, Mark. (2014). Factors that Influence Financial Capability and Effectiveness: Exploring Financial Counsellors’ Perspectives, Australasian Accounting, Business and Finance Journal, 8(4), 2014, 3-22.