Government efforts to improve financial literacy needs a reboot with new research revealing the household budget is dead and Aussies are making financial decisions based on their bank account balance.
The ‘State of the Household Budget’ report (1) by personal loan specialist Fair Go Finance found two-thirds (67.9%) of Australians don’t have a household budget and over half (56.3%) rely on bank account balances to manage their money, in effect living day to day and making financial decisions based on one number.
Fair Go Finance Managing Director, Paul Walshe, said this behaviour is akin to choosing a travel destination based on the amount of petrol in the car and can be incredibly risky.
“Aussies who don’t budget are playing a high risk game, especially if they haven’t accumulated a savings nest egg to rely on. They’re not protecting themselves against a “financial shock” such as job loss, nor are they providing for their future,” Paul said.
When asked why they don’t budget, respondents were apathetic with two in five (43.4%) claiming they don’t care. The remainder blame a lack of time (18.7%), say it’s too hard (13.5%) and the fact they’re scared about what they will find (12.7%)!
Women were more likely than men to claim they didn’t have time (26.2% v 9.3%), it was difficult (16.7% v 11.6%) or scary (16.7% v 9.3%). With women more likely to end up in retirement with less savings and superannuation (2), the lack of budgeting is a genuine concern.
Paul commented, “Clearly the last 20 years have been good to Australians with unemployment and inflation relatively low, however this seems to be changing and people won’t know how to respond as they have lost the discipline and skills of budgeting.
“If people want to realise a dream, avoid a lasting impact on their credit files or worse bankruptcy, they need to have something to aim for and the financial practices in place to achieve it. Critical to this is monitoring their income and expenses effectively.
“Budgeting is not hard or scary and there are plenty of services and tools out there to help you do it including our Managed Money service. In fact, taking control of your money and understanding your financial situation can provide a lot of relief to everyday stresses.”
The research implies that technology and automation is contributing to a lack of financial awareness. Half of Australians (48.3%) receive their household bills electronically but seven in 10 respondents said they’re more likely to open a bill they get in the post. This lack of awareness was highlighted by the fact that nearly a quarter of Australians (22.6%) were more likely to know how much a cup of coffee costs versus household bills like electricity or insurance.
Paul says, “We need to pay attention to where our money is going. We’ve embraced technology like payWave and the convenience of paying bills by direct debit and credit card, but are losing track of how much we’re spending on bigger ticket items and whether the impulse purchase fits in the budget. Just because you transfer funds from one account to another on your phone, doesn’t mean it’s the right time to buy that new dress or go out for an expensive meal.
“It pays to check your bills every month so you can monitor changes, especially those variable expenses. This gives you a chance to modify your behaviour, and it means you’re less likely to suffer ‘bill shock’ when you go to take money out of the ATM or pay another bill.”
In separate research of over 2,000 people, Fair Go Finance found six in 10 (62%) Australians rated their ability to manage their money as average, and nearly a third (32%) know there are things they can do to better manage their money but keep putting it off. (3)
“I urge the Government to put a renewed focus on financial literacy in this country. The 2014-2017 National Financial Literacy Strategy is a real opportunity to challenge people’s attitudes to their finances while putting the emphasis back on learning basic money management skills,” Paul concluded.
Managed Money is a new service from Fair Go Finance helping Australians get on top of their finances by working with them through the four steps of:
- Setting financial goals
- Doing a budget, and working with creditors where necessary, to determine how long it’s going to take to achieve these goals
- Tracking income and expenses and paying bills on time to build a positive credit report
- Putting milestones in place to celebrate successes along the way.
This service gives customers access to a team of experts who will work with customers to get them on track to a stronger financial future. For more information visit www.managedmoney.com.au
Other key findings
Women are more likely to find budgeting hard or scary, and use their account balance to manage their expenses
- A quarter of women (26.2%) say they don’t have time to budget (v 9.3% men), one in six (16.7%) said it was difficult (v 11.6% men), and one in six (16.7%) said they were too scared about what they might find (v 9.3% men)
- Six in 10 (62.3%) of women agree that what is left on their account balance dictates the way they manage their expenses, compared to half of men (50.4%)
Queenslanders are the most financially savvy
- Over a third (37.3%) of Queenslanders either keep a household budget with a detailed breakdown of income and expenses, or keep a budget for a month to get an idea of their household outgoings, compared to just over a quarter (27.5%) of people in NSW
- Seven in 10 (72.0 %) Queenslanders have a savings goal compared to nearly three in five (58.8%) South Australians
Older Generation Ys most likely to have a budget
- Half (48.7%) of 25-34 year olds keep a household budget compared to three in 10 (31.7%) Australians on average
- 32.1% keep a household budget that provides a detailed breakdown of income and expenses
- 16.6% keep a budget for a month to get an idea of their household outgoings
Couples are more likely to have a budget than singles
- One third of (36.0%) married and defacto (34.9%) couples either keep a household budget with a detailed breakdown of income and expenses, or keep a budget for a month to get an idea of their household outgoings compared to one quarter (25.2%) of singles
- Two-thirds (64.7%) of single Australians agree what is left on their account balance dictates the way they manage their expenses
Retirees and young people don’t care about budgeting while Gen-Xers say it’s too hard
- Two thirds (66.7%) of Australians over 65 and six in 10 (61.1%) 18-24 year olds say they don’t care when asked why they don’t budget
- Three in 10 (30.8%) of 35-45 year olds say that don’t budget because it is too hard, one in five (19.2%) say they’re scared of what they might find, and one in five (19.2%), say they don’t have time
Budgeting Australians shun high tech for excel spreadsheets when it comes to recording their income and expenses
- Four in 10 (42.3%) of Australians with a household budget use an excel spreadsheet
- One in five (21.6%) write their incomes and expenses down
- One in five (20.7%) of Australians with a household budget keep an eye on their online bank statements regularly to track their income and expenses
- Only one in 20 (5.3%) Australians with a household budget use a mobile app to budget
Notes to editor
- The ‘State of the Household Budget’ research was undertaken by Core Data on behalf of Fair Go Finance. An online survey of 1,000 Australians over 18 was conducted from 19 September 2013 to 30 September 2013. Visit www.fairgofinance.net.au to download the ‘State of the Household Budget’ report.
- The gender gap in retirement savings: Women have significantly less money saved for their retirement – half of all women aged 45 to 59 have $8,000 or less in their superannuation funds, compared to $31,000 for men. http://www.humanrights.gov.au/publications/gender-gap-retirement-savings
- An online survey of 2,071 Australians over 18 was conducted by Fair Go Finance between 21 January and 21 February 2014
M: 0416 749 426
Fair Go Finance
Fair Go Finance is a specialist online personal loan provider for everyday Aussies. Established in 2008, our aim is to help our customers to access better financial options, now and in the future.
We also partner with introducers including mortgage brokers, car loan companies and financial planners. This helps them to broaden their product range and grow their business as they achieve the best outcome for their clients.
Based in Mandurah, Western Australia, our online access enables customers to contact Fair Go Finance from anywhere in Australia, at a time that is convenient to them.
M: 0416 749 426