COVID forcing Aussies to get on their finances

by Madison Utley12 Aug 2020

While the COVID-19 pandemic and associated economic crunch has brought increased stress to the majority of households across Australia, a national study has revealed the “silver lining” of the last several months.

Australians are more financially aware and, as such, are making better financial decisions as they do whatever possible to minimise the personal impact of the current economic downturn.

The Financial Consciousness Index (FCI), commissioned by comparethemarket.com.au and developed by Deloitte Access Economics, tested over 3,000 individuals for various factors from financial sophistication and financial willingness, to financial capability and financial wellness.

A score of at least 45 is seen to be a sign of financial consciousness. This year, Aussies scored 51 out of 100, up slightly from last year’s 48.

A higher proportion of respondents demonstrated high financial consciousness by scoring over 55 – 38% this year as compared to 31% in 2019.

Just 33% scored less than 45 this year, compared to 40% who failed the test the year prior. However, even with the improvement, that figure translates to 6.5 million adults who lack basic financial literacy.

While the report also found 1.6 million more Australians saved 10% or more of their income each pay cycle this year as compared to last, comparethemarket.com.au GM of digital banking David Ruddiman warned against premature celebration of that restraint. 

“While some Australians may have adopted more responsible savings habits over the last year, the reality is that the nationwide shutdowns drastically minimised the chance for discretionary spending," he said. 

“Restaurants, bars, retailers and entertainment services were either not operating, or operating on tight restrictions, so many Aussies had less opportunity to spend on non-essentials. This resulted in more money left over after paying bills and the ability to contribute more to savings.”

Notably, the study found mortgagors have a higher FCI score than renters, with the former coming in at 56 and the latter 46, a result which was attributed to the fact acquiring and paying off a mortgage requires a certain level of financial consciousness renters may not possess; homeowners must make and meet savings goals for a deposit, understand mortgage finance and manage their money effectively to meet home loan repayments.