The Australian Securities and Investments Commission (ASIC) is proposing updates to its National Financial Literacy Strategy, including shifting the focus to financial capability and outcomes rather than financial literacy alone.
ASIC’s National Financial Literacy Strategy, described as “a framework to guide policies, programs and activities that aim to strengthen Australians’ financial literacy and capability” was initially introduced in 2011, and last updated in 2014.
While previous versions of the strategies have had 3-year timeframes, the proposed 2018 strategy could have a 10 year timeline, to better guide and support sustained action over time.
One significant update proposed for 2018 is one of language; going from referring to ‘financial literacy’ to referring to ‘financial capability’. This proposed change is in recognition of a renewed focus on supporting behavioural change in Australians to actively achieve financial outcomes.
According to the consultation document:
- 42% of Australians say they don’t feel confident managing their money day-to-day
- 36% find dealing with money stressful and overwhelming
- 21% have difficulty understanding financial matters
These figures, combined with the high degree of mortgage stress and household debt recorded around the nation, make it clear that Australians require “a combination of financial knowledge, skills, attitudes and behaviours necessary to make sound financial decisions, based on personal circumstances, to improve financial wellbeing” – the current ASIC definition of Financial Literacy.
The push for greater financial capability, and not just literacy, draws inspiration from similar strategies in the United Kingdom and New Zealand:
“The United Kingdom identifies ‘financially capable behaviours’ such as: keeping track of finances, saving regularly, managing credit use, and working towards longer-term goals.”
“New Zealand’s approach is to frame financial capability activity around five streams of work: talk, learn, plan, debt-smart, save/invest.”
Core behaviours to be encouraged by the proposed strategy include:
- Managing money day-to-day: Keeping track of money in and out; controlling spending; effectively managing debt and credit; protecting assets with insurance; and building a savings buffer to weather financial shocks.
- Planning for the future: Setting and working towards savings goals; understanding and engaging with superannuation; planning and investing for retirement and lifestyle choices.
- Making informed decisions: Having confidence to make money decisions and interact with financial products and services; knowing how to access impartial information and financial education, and get guidance or help when necessary; being comfortable talking about money with family and friends.
Priority audiences for the current strategy include Indigenous Australians, people from culturally and linguistically diverse backgrounds, pre-retirees and seniors, and women. The 2018 update is set to expand this audience to include:
- People with disabilities (and their families or carers) who are navigating choices and options under the National Disability Insurance Scheme (NDIS)
- People in newly-arrived communities who are attempting to understand and access financial services
- Sole parents who may be experiencing long periods of financial hardship or difficulty
ASIC deputy chair, Peter Kell, said:
“Building financial capabilities requires a long-term commitment to lay the foundations for behavioural change over time. We all confront significant financial decisions at key points in our lives, such as leaving school, having children, or reaching retirement. To help people develop healthy financial habits and make better decisions about money we’re seeking feedback on the National Strategy.”
Feedback on the consultation paper is due by Friday 17 November 2017.