Australian’s are among the wealthiest people in the world.
International wealth reports from Credit Suisse consistently show that Australian has one of the largest middle classes and highest level of assets in the world. In 2018 we had the second highest median wealth per adult, and a staggering 80 percent higher than the 8th highest, Canada.
According to the Australian Bureau of Statistics, in February 2019 there were close to 13 million working Australians earning an income to facilitate an enjoyable lifestyle for themselves and often, their dependents. Of these, close to 9 million worked full-time. And while wage growth had slowed, full-time average weekly earnings were over $1600.
During our research we discovered that even though Australian’s are amongst the wealthiest people in the world, it doesn’t always feel that way.
Several studies and research reports indicate that Australians are underinsured, underinvested and over-indebted. The statistics are alarming.
Australians also have the world’s second-largest household debts.
According to the Reserve Bank of Australia, we have nearly twice as much debt as income, and the level of household debt to income exceeded 190% for the first time in September 2019. In April 2019 household debt equalled $2 trillion, equal to $79,000 for each person living in Australia.
90% of the nearly 55,000 respondents to the ABC’s most recent Australia Talks National Survey, rated household debt as a problem for the nation. On an individual level, 39% of Australian households live beyond their means or barely break even, with almost half of millennials reporting that debt is a problem for them personally.
Despite our high disposable income, few were personally diverting this into savings or investment.
As a nation, we’re not well equipped to make smart financial decisions.
Australian’s are worrying themselves sick; about money
This lack of financial capability has led many Australian’s to worry themselves sick; about money.
- Almost half the workforce is worried about their finances, with more than one third saying their financial situation is a major cause of stress.
- 39% of people say they spend two or more hours during the working week thinking about their finances.
Money worries don’t only affect financial health; as one of the single biggest causes of stress, it can impact mental health and physical health too. (Close Bros Financial Wellbeing Index 2019)
Links between money and mental health
The Australian Psychological Society undertook a 4 year study which identified the most widespread stress factor in the Australian population as ‘personal financial issues’; ahead of family issues, health issues or workplace issues.
A recent UK study found that individuals experiencing financial stress were almost 4 times more likely to feel anxious and almost 5 times more likely to be depressed and find it difficult to carry on. A 2018 AMP financial wellbeing survey, found around 2.44 million Australians suffer from anxiety around money.
People under financial stress are more likely to make poor financial decisions, which may lead to debt and further stress that impacts on overall wellbeing, particularly mental health. The problem is cyclical. Worrying about money makes mental health worse and poorer mental health makes managing money a lot harder.
So, what is financial wellbeing?
Money may not buy happiness; but it does buy freedom. Freedom to make choices about the way you live. Financial wellbeing can be described as an individual’s ability to make confident, well-informed money-related decisions resulting in financial security now and into the future.
Financial wellbeing, or the lack of it, affects everybody. One thing is for sure, without money management skills, any one of us could find ourselves with some very serious problems.
Financial wellbeing is one of the most important aspects of overall wellbeing. A recent NZ study undertaken by CoreData highlights the influence of financial wellbeing on overall wellbeing, with only 6.8% saying financial wellbeing has little to no influence on their overall wellbeing.
The impact of the COVID-19 crisis
Pre COVID-19 research had shown that 1 in 5 were not able to access $2,000 in case of emergency.
The impact of the COVID-19 global pandemic has laid this bare. The uptake of assistance in the form of early access to superannuation has brought to light the extent of Australian’s vulnerability and lack of financial resilience.
By mid-July, 2.7 million Australian’s had withdrawn $30 billion from their super, including around half a million who completely wiped out their super accounts. This not only exposes the current extent of the problem, but also that many of these individuals may not understand the compounding impact this will have on their future wealth and wellbeing.
We now have 3.5 million on JobSeeker, and countless more who have lost their jobs and are worried about finding a new one under the circumstances. This, combined with the inextricable moves toward a gig economy, makes building our financial resilience more important than ever.
What can you do to build financial resilience in the workplace?
What’s needed is better financial resilience so employees are not so vulnerable. As an employer, you can help your employees improve their financial resilience.
Research shows that employees would feel less stressed about money issues if they had access to financial education. If we can learn how to do more with our money, we will be in a much better financial position to navigate navigate life’s hurdles, including a sudden loss of income or change in circumstance.
Your employees are what keeps your business running. Many companies are focusing on the mental health of their team, which is a great start. But as we are aware, financial stress is a key influence on mental health.
Improve financial resilience and you reduce the impact of financial stress. You will have a more productive, engaged and resilient workforce, better prepared to face the challenges ahead.
Lyndal Higgins, Money101
Money101 began in 2004, developing the first digital online program to help people learn the financial literacy skills that could give them control over their financial future.
Since then we have become Australia’s leading financial literacy experts, developing industry best-practice digital content for clients including banks, super funds, government, corporates and industry associations.
At Money101, we believe everyone should be empowered to make better financial decisions. This is our passion, and everything we do evolves around this.
Financial Wellbeing by Money101 is designed to empower Australians to make better financial decisions, a workplace solution delivered online, anytime on any device.