Research demands greater financial literacy among Australians
Financial literacy is a skill that impacts all sectors of society, and is certainly not limited to those within the finance industry. While accounting and other financial services do exist, it's important for people to take responsibility and develop at least some familiarity with the relevant ideas and processes.
According to the University of Sydney Business School, Australians are struggling with the concept, which could land them in hot water as quantities and complexity grow.
What is the issue?
Australians are becoming more at risk of making the wrong decisions financially, especially when it comes to managing superannuation services and other complex procedures. This also extends to other concepts that are necessary for survival in modern day life, with the research finding just under half of people cannot answer simple questions surrounding interest rates and inflation.
These are not the sort of skills limited to business owners or accountants either. Everyone who owns a credit card needs to possess a working knowledge of interest rates, while inflation will impact investments of any nature.
This not only impacts day-to-day life, but can also have an affect on savings and investments later on.
"People are dealing with increasingly complex decisions sometimes involving very large sums of money without understanding the basics such as compound interest," says Professor Susan Thorp.
"By any objective measure many lack vital financial skills."
The cause for concern is due to the limited ability for regulation to protect consumers, with people needing to take as much responsibility for their financial wellbeing as possible. If financial literacy is not improved by retirement age then there can be long lasting effects.
"What we see is that people who have poor skills in this area are much less likely to have prepared for their retirement," Ms Thorp continued.