COVID Leads to Increased Financial Literacy Among Queenslanders
During any times of hardship or difficulty, it’s natural to seek out silver linings. During a pandemic, this becomes difficult – though not impossible. Increased under- and unemployment and a dampening economy have left many Queenslanders in economic hardship. It’s also, however, improved our overall financial consciousness.
That’s according to Compare the Market’s Financial Consciousness Index (FCI) report for 2020. Among the report’s 62 pages of data are primarily positive indicators. For example, the average Australian scored 51 out of 100 points on the FCI. That score places them in the ‘financially conscious’ bracket. It’s a clear improvement over 2019’s average of 49 points. The percentage of respondents in the bottom bracket decreased from 17% in 2019 to 12% in 2020. In the Sunshine State, the average Queenslander scored 51 on the FCI – equal to the average Australian. That’s up from 48 just a year earlier.
What is financial consciousness?
Financial consciousness is determined based on four factors:
- Sophistication – how a person understands the impact of their decisions on their financial situation;
- Willingness – how motivated a person is to be actively involved in financial decision making;
- Capability – a person’s awareness and understanding of financial concepts; and
- Locus of control – how much a person believes their actions affect their financial outcomes.
This index of overall financial literacy affects all kinds of monetary decisions, such as loans, insurance, general expenditure, investments, etc. Naturally, this also affects the way Queenslanders look at the purchase and sale of property. It stands to reason that a more financially conscious populace will make more informed decisions when it comes to their homes. In an environment of uncertainty such as we’re seeing now, this may manifest itself in more conservatism – a reluctance to buy and sell.
We certainly saw that reluctance early on in the pandemic’s cycle. The three months ending May 31 saw a 29% decrease from the three months ending February 29. What the increased financial literacy may lead to, however, is an increased ability to negotiate better interest rates, making more informed purchasing decisions, and being more aware of potential government grants and subsidies.
How COVID increased financial consciousness
Compare the Market General Manager of Digital Banking David Ruddiman said in the report the increased consciousness came as somewhat of a surprise. “The general assumption was that we would see results plummet as Australian lost confidence in their personal finances,” he wrote. “But rather than it being despite the crises, it is in fact because of the crises that on average Australians have become more attuned with their finances.
“The results show that this year’s tough economic climate has forced many Australians to become more proactive with their household budgets,” Ruddiman continued. “Government support is undoubtedly paramount to our country’s recovery, but it is also crucial that more Australians understand the key role they can play in controlling their own future financial outcomes.”
While it’s hard to find too many positives from this health and economic crisis, we should take solace in the fact Queenslanders are better preparing themselves for their financial futures.