Financially capable behaviours – such as active savings and not borrowing for everyday expenses – are key to achieving financial wellbeing. If you are financially capable, you have the ability to make informed judgements and effective decisions about how you spend and manage your money.
"Improving women’s financial capability and has a direct link with boosting women's economic participation, including building women's retirement incomes and savings.”
Perhaps unsurprisingly, the gender gap also exists in financial capability.
A University of Western Australia study shows in Australia, on average women are often less financially literate than men. And they are also disproportionately affected by issues of insecure housing, insecure employment, higher costs of living and high levels of debt which make it difficult to break the cycle of poverty and achieve financial security.
Women of all ages and backgrounds struggle with the pressure to earn enough, access education, care for a family and plan for retirement. Even those who are well educated and have good jobs may not have a good savings habit or know how to manage expensive debt well. Nor, typically, are women across demographics educated about their superannuation. As a result, most women will retire with far less superannuation due to interruptions in employment from maternity leave and caring responsibilities and they are more likely to work part time, casually or take periods of time away from paid work.
Overcoming these challenges is important. Improving women’s financial capability has a direct link with boosting women's economic participation, including building women's retirement incomes and savings. Financial capability is also critical for women who have experienced violent relationships if they are to remain safe and rebuild their lives.
The results from the most recent ANZ Roy Morgan Financial Wellbeing Indicator were particularly telling, with the COVID-19 pandemic having a detrimental impact on overall financial wellbeing scores. A key driver of this reduction has come from people - in particular women - feeling less confident about the future. The lack of confidence extends to the ability to withstand unexpected events. While some elements are improving, the gap between men and women remains with women scoring lower on these scales than men.
While both men and women experienced falls in their ability to meet everyday commitments and how they feel about their current and future financial situation, only women experienced a fall in their resilience – their ability to meet financial shocks.
This connects to the increased likelihood that women work in casual employment – roles which were more affected by COVID-19 restrictions and did not see them eligible for JobSeeker payments. Women were also more likely to have been the primary carer during periods of lockdown and school closures, also placing pressure on their financial wellbeing and employment.
ANZ works with organisations with a shared interest in financial wellbeing to assist policymakers, business and civil organisations to develop appropriate actions to improve the financial wellbeing of individuals and the broader community - and to help ensure everyone can build economic security.
The bank is also supporting the Brotherhood of St Laurence to examine the impacts of the pandemic on the financial wellbeing of more vulnerable groups. So far, research has shown while the overall financial wellbeing of Australians was increasing before the COVID-19 crisis, these gains were not enjoyed equally – with lower income households, unemployed workers, single parents, disability pensioners, young people and renters not making the same gains as higher income households.
A common factor across these groups is their limited access to full-time work, resulting in lower incomes and high expenditures relative to income. This creates challenges meeting basic expenses and limits their ability to save.
While this leads to weakened financial resilience in the short term, over the longer term it is likely to reduce an individual’s ability to build financial security.
As former ANZ Tony Nicholson Research Fellow Dr. Jeremiah Brown observes, banks play a major role in the formal economy and are an important stakeholder in helping support people and communities. Banks help shape the connectivity and inclusiveness of the economy, creating the opportunity to help people who may otherwise experience exclusion and deprivation.
Education is empowerment. Closing the financial capability gap is central to improving women’s financial security and wellbeing. But it’s not just formal education that can solve this problem. Conversations about money also need to change – we need to talk more openly about money with friends and family and the importance of having a budget and saving for a rainy day.
With young people in particular, this is an easy and practical way of improving their financial capability and helping them to achieve financial wellbeing.
Jenefer Stewart is General Manager, Business Banking at ANZ