Robin’s fixing bad money habits, and wants us all to learn a lesson in personal finance
When Robin Dougherty was diagnosed with cancer at 73 and no longer able to work, a lifetime of bad money habits meant she didn’t have a safety net to fall back on.
Instead, Robin found herself homeless in Sydney, having to couch-surf between family members to get by.
“My attitude with money was you work hard enough and you make a lot of money — you can spend a lot of money,” she said.
Robin was never taught about money from her parents and her husband wasn’t good with money either.
After he passed away while they were in their 50s, Robin worked full time to keep the family going. She didn’t think about putting aside money for her retirement.
Now living in a retirement village, she wants people to learn from her mistakes and start getting interested in their money sooner.
“As soon as you start working, try and put something aside every week. Start thinking about later,” she said.
“If you suddenly win the lottery, that’s fantastic, but you can’t rely on that.”
She has decided it is not too late to get better at managing her money and has signed up for a financial literacy class run by not-for-profit organisation Good Shepherd.
About a third of Australians find dealing with money overwhelming, according to the 2018 Financial Attitudes and Behaviour Tracker published by the Australian Securities and Investments Commission (ASIC).
The findings are supported by other research including the Melbourne Institute’s HILDA report, which tracks the lives of more than 17,000 Australians each year.
The HILDA report asked participants five financial literacy questions and found half of all men answered all questions correctly, compared to just 35 per cent of women.
Time to treat ‘financial literacy like a public health crisis’
Ross Guest, a professor of economics at Griffith University, says it’s time to treat financial literacy like a public health crisis.
“Financial health is just as serious as physical or psychological health,” he said.
According to Professor Guest, bad financial decisions can lead to stress and other mental health issues and affect the workplace in terms of productivity and sick days.
And if enough people make mistakes it has a spill-over effect into the economy.
“We should really be taking a public health approach to financial literacy, in the same way we have public health campaigns around things like smoking or road safety campaigns,” he said.
Why do people struggle with financial literacy?
Sydney University professor Susan Thorp, who is also a member of the financial education branch of the OECD, says your background and home life can determine how much you know about money.
“Skills in financial literacy are strongly socio-economic-related and also correlated with other forms of ability, like numeracy,” she said.
Professor Thorp believes the financial world we live in now is more complex than ever, with mandatory superannuation for all workers and an increasing number of choices of financial products.
“People are now having to take responsibility for a set of decisions they have very little social capital to deal with,” she said.
This was highlighted by the banking royal commission, which found people were charged fees for no service and sold inappropriate products.
The major parties have different plans for dealing with this
Financial counsellors, who deal with people once they’re in debt, and financial rights lawyers, who help take matters to court, are busier than ever.
In response to the findings of the royal commission, the ALP has announced an election promise to better fund them, by creating a bank levy to raise $640 million.
But Professor Guest said he was disappointed to see the levy would not include funding for financial literacy.
“What we need to do is take a preventive approach rather than a treatment approach to this,” he said.
Labor disagrees, with Opposition spokeswoman for financial services Clare O’Neil saying she wanted to caution people about this idea “that if consumers could understand more then we wouldn’t run into these problems”.
“The truth is there is a fundamental imbalance between the knowledge that big banks and financial sector companies have and ordinary consumers,” she said.
Financial Counselling Australia chief executive Fiona Guthrie, who is also on the board of the Financial Literacy Strategy, agrees that we can’t expect people to be experts in financial literacy.
“We don’t tell people to go out and be doctors, so in financial literacy we’ve got to be careful we don’t fall into the same trap,” she said.
“The fact we need to rely on community education says there is a failure in the system at the moment.”
‘Money skills are not a nice to have, they are fundamental’
The Government has also looked at addressing the issue of financial literacy, having set up a new financial capability body, Ecstra, to promote financial literacy and practical skills.
Currently, corporate watchdog ASIC has responsibility for coordinating financial literacy and runs the Moneysmart website and a schools program.
But Ecstra will work in addition to this, receiving a total of $55 million in funding from the Government and from a settlement agreement between ASIC and three banks, CBA, NAB and ANZ, for breaching responsible lending laws.
Money expert Paul Clitheroe, who is the chair of both the Financial Literacy Board and Ecstra, says a significant effort has gone into the area of financial literacy for the past 15 years.
“But can we and should we do more? Absolutely! In this complex world, money skills are not a ‘nice to have’ they are a fundamental skill required by all Australians. Additional funding is critical here,” he said.