We all suck at Financial Literacy!

With most of the recent headlines more reflecting ‘ Clear and alarming gender divide when it comes to financial literacy.’ I don’t believe this is the right take on the findings of the HILDA study (even if the researchers and most media outlets have jumped on this, but I have never been one to follow the pack).

#spoileralert neither gender is great! The research shows we all suck at Financial Literacy.

The gender divide is an issue though. With 35.4% of women getting all financial literacy questions correct vs 49.9%, the other worrying aspect is that women often leave financial decisions to their significant other (so does that mean men get it right half the time?). So what are you doing? Are you actively engaged in your financial literacy? Is this research just telling us what we already know? The question is are we ready to listen and take action? And if not for you (although it should be!), then for those you love.

The HILDA* study has added in questions to provide a financial literacy score and we are able to look at this by age and sex. We can go through each answer in detail but the bottom line is, we need to educate ourselves more.

No surprise that 15-24 year old women scored the lowest overall (except money illusion, which is very important for this age group, so that is great). Why is this no surprise? Because we do not teach financial literacy at schools and we need to. We need to teach financial literacy in a way that engages and resonates with our girls and women (and boys and men) and the key to this is linking to the why is it important.

Why? ‘Because economic outcomes shows these to be highly predictive of financial literacy’

The reality is each of us, needs to understand the fundamentals of financial literacy and the earlier we engage, the greater impact we can have on our financial destiny. From 25-34, 35-44 and 45-54, are the years that will set us up financially for the rest of our lives. The survey shows that we improve our financial literacy through these years, but it is not fast enough.

We have 30 years of income, investment and building wealth, to enable us to have the next 30+ years of fabulous (or not).

The concepts of interest, inflation, diversifying investment, risk vs return and future value of money and expenses, are all critical to our ability to live comfortably today, but not at the expense of our future selves. They are not difficult concepts to understand, if we are engaged appropriately, unfortunately the finance industry is not structured in a way that does this. In fact, it is easy to believe it is actually designed to the do just the opposite. So find your tribe, the ones that educate and put YOU in the driver seat of your life.

So check out the questions below and see how you compare to other women in your demographic:

1. Suppose you put $100 into a no-fee savings account with a guaranteed interest rate of 2% per year. You don’t make any further payments into this account and you don’t withdraw any money. How much would be in the account at the end of the first year, once the interest payment is made?

2. Imagine now that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, would you be able to buy more than today, exactly the same as today, or less than today with the money in this account?

3. Do you think that the following statement is true or false? “Buying shares in a single company usually provides a safer return than buying shares in a number of different companies.” (True or false?)

4. Again, please tell me whether you think the following statement is true or false: “An investment with a high return is likely to be high risk.” (True or false?)

5. Suppose that by the year 2020 your income has doubled, but the prices of all of the things you buy have also doubled. In 2020, will you be able to buy more than today, exactly the same as today, or less than today with your income?

How did you go? and what are you doing to build your financial literacy and education?


*The Household, Income and Labour Dynamics in Australia (HILDA) Survey is a household-based panel study that collects valuable information about economic and personal well-being, labour market dynamics and family life. It aims to tell the stories of the same group of Australians over the course of their lives.

Life You Choose has a series of free Financial Movement events, to educate women on the realities of life, work and money and how they can take control of their financial independence, BUT this is not enough! We need strong and affirmative action from ourselves, society, business and government and we need more of it NOW!

We need to talk about the devastating statistics for work, life and money for women. The average age for women when they divorce is 42.9 years, with almost 50% of divorces involving children, if we have been out of the work force or even working part-time, our ability to financially recover is so incredibly difficult. There have been a number of high profile examples of women, who gave up their career to support their husbands, only to be then pushed to the side in their later years. Even if your relationship is rock solid, women live longer and by old age only 17% of us are still married. Don’t leave it too late to take control of your financial destiny.


Correct answers:

  1. $102 2. Less 3. False 4. True 5. Exactly the same



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