Clueless and ripped off: young Aussies’ financial literacy problem
When it comes to monthly savings, young Australians are apparently rolling in it.
Map My Plan’s Financial Fitness of Working Australians report found Generation Y (those aged 21-35) were saving the most of any generation each month – about $500 on average, compared to Generation X’s $400 and the baby boomers’ $300. And when it came to their overall financial fitness, Gen Y were right on the national average – with an financial fitness index score of 114 out of a possible 200.
Sounds like they’re doing okay, doesn’t it?
But that’s not the whole picture. Our research also revealed young Australians are stressed about their personal financial situations. And now there’s confirmation the younger section of the generation (those 24 and under) are often ripping themselves off, because they’re seriously undereducated when it comes to financial products.
A survey by Canstar found the vast majority (90 per cent) don’t shop around for the best rates on credit cards, savings accounts and loans. Of those who had credit cards, more than half admitted if they looked around they would likely find a better deal. And almost a third didn’t understand the concept of interest rates.
Another study by ANZ found 18-24 year olds are more disconnected than any generation before from money issues, and they often end up learning financial lessons the hard way.
Shop around smarter
So you’re looking around for a new credit card, a savings account, whatever. It’s easy to jump at the first option your bank throws your way, especially if you don’t really understand what all the numbers and fine print mean. But instead, stop! Don’t do it. There’s absolutely no guarantee that product is right for you. Here are some tips to help you decide:
- Figure out why you need this product. Want to buy your first car? Make sure you’re looking for a high interest savings account (with minimal fees as a bonus). Moving out of home? You might have some big expenses on the horizon, so if you’re going for a credit card make sure it’s got a low interest rate.
- Put in the hard yards. There’s plenty of card and account options out there, which makes searching for the best deal a little tedious. But pay attention, and it will pay off. Read the fine print.
- Live while you’re young. Your finances aren’t too complicated yet, so take advantage of competitive banking offers.
- Loyalty won’t get you far. You’ve been with that financial institution since you were five? So what? The big banks rarely have the best deals on products, and you will most likely find a better deal elsewhere – as well as a smaller, more personal vibe.
Correcting the literacy lack
The answer to under-education? It’s obvious - we need to get educated. Parents need to talk with their kids about financial concepts and encourage smart saving and spending habits from a young age. It would be great to see schools get on board with with basic money management programs.
So if you’re looking to educate yourself, there are plenty of resources online. For example, Map My Plan’s online financial advice platform not only helps you build your own financial plan, it comes with a library of independent resources and articles.
Taking charge of your finances begins with a plan, so sign up to Map My Plan for free and get started creating yours today.