There is a clear and alarming gender divide when it comes to financial literacy in Australia, according to the annual HILDA survey of more than 17,000 people.
In one of the first attempts to measure financial literacy nationwide, the Household, Income and Labour Dynamics in Australia (HILDA) survey asked respondents five questions relating to financial literacy. It found only 35 per cent of women answered all five questions correctly, compared with 50 per cent of men.
Can you correctly answer all of the five questions put to survey respondents? (See correct answers at the bottom of the article):
1. Suppose you put $100 into a no-fee savings account with a guaranteed interest rate of 2% per year. You don’t make any further payments into this account and you don’t withdraw any money. How much would be in the account at the end of the first year, once the interest payment is made?
2. Imagine now that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, would you be able to buy more than today, exactly the same as today, or less than today with the money in this account?
3. Do you think that the following statement is true or false? “Buying shares in a single company usually provides a safer return than buying shares in a number of different companies.” (True or false?)
4. Again, please tell me whether you think the following statement is true or false: “An investment with a high return is likely to be high risk.” (True or false?)
5. Suppose that by the year 2020 your income has doubled, but the prices of all of the things you buy have also doubled. In 2020, will you be able to buy more than today, exactly the same as today, or less than today with your income?
Only 24 per cent of all respondents aged 15 - 24 answered all five questions correctly compared with 55 per cent for those aged 55 - 64.
Why does financial literacy matter?
The survey found that the poverty rate among the least financially literate group is more than twice the poverty rate among the most-literate group.
The latest findings (2015-2016) from the Association of Superannuation Funds of Australia shows that the average superannuation balance for men is around $112,000 but just $68,000 for women.
Census data from 2016 found that the number of older homeless women had increased by 31% in the previous five years. And research shows that homelessness prompted by domestic violence is closely linked to the victim’s financial independence.
The HILDA survey also found that those who scored low are more likely to be impulsive. And while those who scored low are less likely to hold a credit card, they are less likely to pay off their full credit card balance if they do have one.
A report published in 2017 by the Commonwealth Bank suggests that “only around one-third of women have been taught about the benefits of long-term investing when they were young, with lasting effects on their behaviour and financial wellbeing.”
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Answers to survey questions:
$102 2) Less 3) False 4) True 5) Exactly the same