Financial wellbeing: on the mend but long COVID concerns

When the pandemic hit in early 2020 the impact was felt across all demographics. The initial uncertainty meant people felt less comfortable about their current and future financial situation.

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That was evident in a 6.9 per cent fall in financial wellbeing in April and May measured by the ANZ Roy Morgan Financial Wellbeing Indicator, with lower financial wellbeing persisting throughout 2020.

“In the first year of the pandemic younger Australians experienced the biggest fall in financial wellbeing of all age groups.”

Thankfully, financial wellbeing has changed generally for the better for Australians during the second year of the pandemic as vaccines were rolled out and Australia began to ‘open up’ domestically and internationally.

The latest ANZ Roy Morgan Financial Wellbeing Indicator shows improving economic conditions have resulted in a 2.8 per cent increase in financial wellbeing from March to December 2021.

The trend is not uniform however. And there is particular concern around a younger demographic – particularly in an environment where that same group has shown to be vulnerable to financial misinformation.

For example, the Australian Securities and Investments Commission (ASIC) has recently been warning about misinformation and outright scams on social media. ASIC has specifically warned social media influencers who post about finance, so-called “finfluencers” who can have very large followings and are not always properly licenced.

But there are now more people with ‘no worries’ – the highest levels of financial wellbeing (scoring greater than 80 out of 100) – increasing 3.6 percentage points from March 2021 to 22.8 per cent in December 2021.

However, the proportion of Australians with very low financial wellbeing, who are ‘struggling’ with their finances (scoring less than 30 out of 100), has barely improved in that same time period.

The pandemic has also had a disproportionate impact on different age groups. On average, younger Australians already experience lower financial wellbeing than their older counterparts. Moreover, in the first year of the pandemic, younger Australians experienced the biggest fall in financial wellbeing of all age groups, down 7.3 per cent. The 14–24-year-old demographic were also the only age group to show no recovery in 2021, a result driven by a higher number of individuals employed in retail and recreation or personal industries such as sports, restaurants, gyms and hairdressing.

It is also this same group who are most active on social media and likely to encounter misinformation and where it is difficult to decern between trustworthy independent sources of information, voices who may be receiving payment for their endorsement, and even scams.

The financial wellbeing indicator is made up of three components: the ability to meet everyday commitments; whether people are feeling comfortable about their current and future financial situation; and resilience – their ability to sustain financial shocks.

While 14-24 year-olds experienced some improvement in how they were feeling about their current and future financial situation, the lack of improvement in their financial wellbeing appears to be driven by falls in their ability to meet everyday commitments and their resilience.

This suggest while younger Australians were somewhat positive about their financial situation compared with a year ago, meeting bills was still a struggle for some and concerns remained about the ability to sustain further financial shocks as savings may have been drawn on during the pandemic.

Underlying trends

The 2021 ANZ Financial Wellbeing Survey found physical and mental health had the largest socioeconomic influence on financial wellbeing. In fact, health had a larger impact on personal financial wellbeing than an individual’s saving and spending behaviours.

In December 2021, 57.9 per cent of people aged 14-24 years reported they had experienced a mental health condition in the last 12 months (such as anxiety, depression, panic attacks, stress, substance abuse or sleep disorders), up 12.4 percentage points from 45.5 per cent in March. By comparison, the incidence of mental health conditions amongst the total population increased less than 5 percentage points, from 40.5 per cent to 45.4 per cent.

The greater and increasing extent of mental health conditions among those aged 14-24 years is likely to be a factor for the lack of recovery in their financial wellbeing between March and December 2021. Unfortunately, again, this group is more likely to be vulnerable to misinformation.

Over that time, young Australians who were not experiencing a mental health condition reported a 2.7 per cent improvement in their financial wellbeing.

The experience of the pandemic has also impacted the confidence of 14–24 year-olds. Younger Australians were already less likely to feel financially stable and less confident about managing their finances than other respondents after a year of the pandemic, with the gap widening between March and December 2021.

Trustworthy sources

The 2021 ANZ Financial Wellbeing Survey showed financial confidence and a sense of control over our financial lives is key to improving financial behaviours. It has a direct impact on whether someone saves, spends, borrows for everyday expenses or invests in the longer term - all of which contribute to overall financial wellbeing.

Improvements in confidence and control over our finances are underpinned by better financial knowledge, having an optimistic outlook, setting goals and planning for the future. To lay these foundations it is important that younger Australians seek information, guidance or support with their finances from trustworthy sources such as:

  • ASIC MoneySmart – a free and independent service that has easy-to-use tools to help you manage your money, plan, invest or pay off debt.
  •  The National Debt Helpline - financial counsellors provide free information, support and advocacy to people in financial difficulty.
  • MoneyMinded – ANZ’s adult financial education program delivered in partnership with community organisations, which seeks to build money management skills, knowledge and confidence. (MoneyMinded does not promote ANZ products or services.)

Natalie Paine is Social Impact Research and Reporting Lead at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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