When it comes to financial wellbeing, ‘knowledge is power’

October 6, 2021

How good are you at money matters? According to the latest financial capability survey* from the Te Ara Ahunga Ora Retirement Commission, a key way to boost your financial wellbeing, now and in the future, is through improving your financial knowledge.

So, what does financial capability mean? Put simply, it’s the “ability to manage money well”; your behaviours, attitudes, and knowledge when it comes to money.

Here are some key things to know.

How is Kiwis’ financial capability?

While a majority of respondents (68 per cent) were ‘fine for now’ and ‘secure’ when it comes to their financial wellbeing, 32 per cent were ‘in difficulty’ and ‘at risk’. The minority had limited resilience for the future, with little to no savings, and lower levels of key financial knowledge and behaviours.

And, when it comes to financial products (like loans or insurance), about 66 per cent of Kiwis made poorly informed choices, and over 85 per cent didn’t have enough knowledge to compare the terms and conditions of such products.

Your financial knowledge can have the greatest impact

According to the report, your financial knowledge can have a significant influence on your behaviours and overall financial wellbeing – even more so than income, age, gender or ethnicity.

While socio-economic circumstances can affect long-term financial wellbeing, “changing behaviours and attitudes and equipping people with knowledge can shift the dial.” Improving money knowledge can effectively address the gap in Kiwis’ financial capability, especially for women.

Key behaviours that can help

Along with knowledge, here are some of the key behaviours that were found to have the greatest impact on your financial wellbeing, as well as on the outcomes of your investments:

  • Actively saving
  • Restraining your spending
  • Not borrowing for everyday expenses
  • Staying well-informed on financial decisions and products
  • Keeping track of your money
  • Having a budget or a spending plan
  • Mindful use of loans and credit.

The ‘missing link’ between knowledge and behaviour

While knowledge and behaviours are key to your overall financial wellbeing, money psychology is also key to making any positive changes. For example:

  • Long-term thinking – not just considering the ‘right now’ when making financial decisions.
  • Impulse control – how much thought you give your expenses,
  • Concern about social status – avoiding comparison with other people’s spending and lifestyle.
  • Self-control – the ability to break poor habits and apply self-discipline for the long-term.
  • Financial confidence – how confident you feel about making the appropriate decisions about money management, and planning for your financial future.

Like to learn more? Check out the report here.

We are here to help

As advisers, can help you understand financial solutions and your decisions in more detail, on your journey to long-term financial wellbeing. So should you have any questions at all, get in touch anytime.  

Research Methodology: Te Ara Ahunga Ora’s financial capability survey 2021 was conducted amongst a nationally reflective pool of 3,037 New Zealand adults between 26 February and 19 March 2021.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.