What's happened to financial literacy in Australia today?

I don't know about you, but I have a big concern about the level of financial literacy and access to suitable financial education in Australia, for all Australians. I believe it's simply insufficient.

As a mortgage and finance coach, my focus is always on understanding my clients' financial position and assisting them to understand and take action/s to greatly improve their financial situation and have confidence in their decisions. Much of the work I do often doesn't involve the numbers but rather in working with mindset, attitude and the skills required to analyse and interpret information to make powerful decisions - in developing the ability to choose wisely and effectively.

In my view, financial literacy education does not equal effective financial decision making. An ASIC survey report in 2007 was inconclusive in it's findings largely because the study was subjective rather than objective and failed to shed any light on what's really important when it comes to running a family and household on limited income.

Knowing how we should manage our money has little effect on whether we take ongoing action and form positive and effective habits. Often households do take actions however sometimes we may choose some action which may not resolve the situation. All too often we fail to stay on track toward forming continual actions and positive habits to improve our circumstances. Not knowing who we can trust or count on all too often results in no action or insufficient actions toward positive change - especially when we are drowning in our financial circumstances and feeling alone, helpless or even hopeless.

Allow me to pose a few questions to consider. You might like to comment on these with your views and thoughts.

When will financial literacy and decision making be taught at school? And, are the teachers suitably equipped to teach more complex matters? This would be a powerful intervention in itself, however, I believe the most powerful community to make a difference in this area is us - the financial services community.

Our community need to become acutely aware of our commitment, concern for and passion to make a genuine difference in the lives of our local communities and not feel like it's a sales transaction. The commitment and concern needs to far outweigh the economics of doing business (not to discount that at all). We must become far more personable as professionals.

We are the community who are trained and equipped to make the biggest difference. So, what really stops someone from seeking out support from a financial expert? Is it fear of a huge bill? Fear of saying no to a product of service they don't want or understand? Is is simply confusion that renders us incapable of choosing wisely? Maybe all of the above...

In today's fast paced and technological society, we have access to more information than ever, we know more about many topics than ever before. However, I feel many households have difficult with the ability to understand more high level decision making processes or feel overwhelmed with the amount of information available and end up making no decision or sadly, the wrong decision. In many cases, a string of good decisions and habits can be undone with just one bad decision, leaving individuals and households shattered and feeling helpless to change their situations.

In ASIC's Financial Attitudes and Behaviour Tracker from December 2015, it showed whilst 61 per cent of respondents said they were "confident" about finances, only 53 per cent said they tried to stay informed about financial matters. So what are these respondents so confident about?

When the government started adopting changes to superannuation recently, how many people really understood the changes? How many industry professionals, media representatives and even politicians were confused? So where does that leave Average Australian individuals and households? What about our school aged children and teens who are about to have 9.5 per cent of their earnings put in to retirement savings? What does this mean to them?

Further still, how many adolescents and children understand how a mortgage really works? Do they understand how a minimum repayment is calculated on their credit card? How does compounding interest work? Do 18-year-olds really know and understand what a credit score is? Or how to access it? Do our youth really know what a mortgage broker actually does? From personal experience, I know there are far too many home owners who are paying way too much interest, fees & charges on their mortgage simply because they don't know how to shop around effectively and with absolute confidence - they don't know what questions they should be asking, which is more important to know and prioritise and what is a secondary issue of less importance.

If we take a look at Superannuation habits and social polarity you'll see the same sorts of mistakes happening because our younger workers don't have a complex understanding about suitable life stage strategies and as such may end up putting all their super into a conservative low risk fund simply because they don't understand the importance their age has on the performance of their superannuation in relation to their risk profile.

What about when it comes to insurances? How many people know what they can and can't claim when a disaster occurs such as storms or flooding? How do you distinguish one policy from the next? Or does convenience overrule our decision making process?

There is a huge impact within a community which lacks financial literacy and the ability to make complex decisions about their financial future. What if we as a community could lift the level of financial literacy and decision making? Wouldn't that be beneficial to everyone?

Our financial system offers huge advantages to hard-working, educated and informed people who have the confidence and ability to make important financial decisions. It's up to us make the difference to place more value on education, mindset and attitudes toward money. We can show Australian households and our future generations through our young Australians, how they can enjoy the benefits of financial literacy rather than continue to suffer the disadvantage and painful alternative.

What can you do today to make a difference within your community? I'd love to hear what you're already doing and the impact it's making - please take the time to comment below.

Here's my contribution today towards empowering our financial services community to fulfil on a greater commitment to financial literacy, confidence and effective decision making:

Nine Steps to Effective Financial Capability:

1. Accessibility -Financial literacy material needs to be very widely accessible, adopted and embodied by the wider community. 
2. Timing - Teachable Moments. Reach out to consumers when they are making financial decisions. This is when their attention is most captive.
3. Learning by Doing - Allow and encourage consumers to practice using products. Let's also not discount the benefits of watching others and learning through observation and mimicking.
4. Intuitive Intervention - Nudges, Reminders, and Default Options embedded in our software, apps and devices. Timely reminders and default options support good habits.
5. Use Heuristics - Rules of Thumb. Mental short cuts help turn learning into habits that can stay with us for a life time and be passed down through the generations.
6. Enjoyable - Make It Fun. Games and humour greatly enhance learning capability, retention and the adoption of new and effective habits.
7. Tailored - Customise It. Tailor advice to an individual’s specific and unique financial situation is crucial. Make it individual and personable.
8. Make it Social - Leverage the influence of peers and culture. Technology allows us to be more connected than ever via social media platforms. Social acceptance and peer support is extremely important in the adoption and forming of new habits.
9. Accountability - If the banks and lenders adopted greater active accountability toward financial literacy and competency - what would the impact be on our current and future generations?

If you have any questions or contributions relating to this article, please take the time to comment below and share your thoughts or opinions for the benefit of others reading this. No doubt this topic commands interaction, innovation and collaboration. The more answers that are delivered, the more questions that will arise. If you have any personal questions or queries, please feel free to contact me on 0434 455 225 or email: [email protected]

About the author:

John Maxwell is founder and Senior Finance & Business Strategist at Cocalex Consulting. John has over 17 years' experience in the financial services sector, and has owned and managed 9 mortgage franchises and has developed a background across the holistic financial services realm. He has particular focus and passion for: Leadership Training and Development, Franchise Development and Business Networking.