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This is how financial literacy can improve your future health

31 July, 2017
Australian's financial literacy

Financial literacy can help your health

Your financial literacy change your future health, whether it's allowing you to eat healthier to save money, saving you from stress or allowing you to prepare for your retirement. If you haven't got a handle on budgeting and what it means to save, working on your financial literacy can bring big changes to your life.

What is financial literacy?

Your financial wellbeing and financial literacy are tightly intertwined. Financial literacy is your level of understanding money and its function in the real world, and just like your reading/writing comprehension, financial literacy refers to both your ability and knowledge when it comes to the handling of money.

Why is financial literacy important?

Money makes the world go round, keeps food on the plate and a roof over your head. Unlike your lazy Labrador or tabby, people are cursed with having to make plans that can span decades and have far-reaching consequences.

Ensuring you’re on top of your finances, knowing the status of your debt, and being able to plan for the future is part and parcel of modern living. In the short-term, ensuring you know about where and how your money is being spent is going to save you a lot of stress. In the long-term, it’s going to allow you to reach savings goals and prepare you for retirement.

 

Are Australian’s financially literate?

Yes – and surprisingly so.

Not only do Australians self-report high levels of financial literacy (understanding their rights and responsibilities, financial terms, and ability to recognition of scams), their confidence is borne out by the data. Australia ranks first in the region and 9th in the world when it comes to financial literacy, beating the USA, most of Europe, and the majority of Asia.

However, 1/5th of Australian students lack basic financial literacy.

Those lacking in financial literacy are more often from a lower socioeconomic backgrounds, attended rural or remote schools, or were Indigenous.

 

What do you need to know to be financially literate?

Knowing your personal financial situation

Your first step is understanding your own money – where it’s coming in from, where it’s going, and what you want to do with it. Here’s a checklist to tick off:

Do I know my…

My earnings per week/fortnight/month?

Yes/No

My expenses per week/fortnight/month?

Yes/No

My savings per week/fortnight/month?

Yes/No

My future objectives?

Yes/No

Where my super is?

Yes/No

If I have unclaimed money?

Yes/No

Current budget?

Yes/No

 

Have an understanding of financial terms

Financial terminology can be tricky in the same way scientific terminology is – the professionals and the laymen use the same words for completely different purposes.

One of the most helpful online resources to understanding finance is Investopedia – here’s a few key definitions to start with:

Budget: A budget is an estimation of revenue and expenses over a specified future period of time

Savings: Savings consists of the amount left over when the cost of a person's consumer expenditure is subtracted from the amount of disposable income earned in a given period of time.

Credit: Credit is a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest.

Debit: A debit is an accounting entry that results in either an increase in assets or a decrease in liabilities on a company's balance sheet. In fundamental accounting, debits are balanced by credits, which operate in the exact opposite direction.

Debt: Debt is an amount of money borrowed by one party from another. Debt is used and as a method of making purchases that they could not afford under normal circumstances.

 

Ability to create a budget

Multiple sources of income, bills paid by direct debit, and multiple accounts and cards can make it tricky to keep a budget. In principle, however, budgets are straightforward: calculate your earnings, calculate your expenses, and put it into a table or form you understand.

Example:

Fortnight

Income

Expenses

Cost

Total

1500

Rent

440

 

 

1040

 

Groceries

200

 

Entertainment/Going out

150

 

Health and fitness

50

 

Bills

200

 

 

 

Savings

 

 

 

460

 

If you’re not keen on creating your own budget, most banking institutions have their own budgeting apps, and we’ve created a list of our favourite budgeting apps!

 

Planning for the future

Depending on your lifestage, your plans for the future may vary – it might be a trip you want to make in a few months, a house you’d like to buy in ten years, or your retirement in the next thirty. Whatever your goal, planning for the future requires a good understanding of your current and potential future financial position.

Simple ways to plan for the future include:

  • Separating your long-term goal into a series of short-term goals
  • Keeping an eye on your superannuation and investments
  • Leaving a savings account that you do not touch

If you’re not confident in your ability to plan that far in advance, it’s worth speaking to a financial advisor so they can provide you with expert advice on how to reach your goals.

 

How can I improve my financial literacy?

Your first stop is ASIC – they’ve got amazing financial guidance and resources available at https://www.moneysmart.gov.au/. After that, visit the ATOs website. If you’ve got a myGov account, you can lodge your tax return from here, check your super, and find helpful tools like tax and health insurance rebate calculators.

Apart from that, you can research further, or find an accredited financial advisor to get professional advice.

 

Sources

https://www.moneysmart.gov.au/media/209293/australians-understanding-money.pdf

http://www.investopedia.com/terms/f/financial-health.asp

http://www.financialliteracy.gov.au/media/559536/australian-financial-attitudes-and-behaviour-tracker_wave-4.pdf

http://www.financialliteracy.gov.au/research-and-evaluation/financial-attitudes-and-behaviour-tracker

http://www.financialliteracy.gov.au/

https://www.moneysmart.gov.au/teaching/financial-literacy-research/financial-literacy-in-australian-schools

http://research.acer.edu.au/ozpisa/27/

https://theconversation.com/why-is-australian-15-year-olds-financial-literacy-declining-78332

https://www.austrade.gov.au/news/economic-analysis/australia-has-the-highest-financial-literacy-rate-in-the-asia-pacific-region

http://gflec.org/wp-content/uploads/2015/11/Finlit_paper_16_F2_singles.pdf

http://www.rba.gov.au/publications/bulletin/2008/sep/pdf/bu-0908-3.pdf


All information contained in this article is intended for general information purposes only. The information provided should not be relied upon as medical advice and does not supersede or replace a consultation with a suitably qualified medical practitioner. CBHS endeavours to provide independent and complete information, and content may include information regarding services, products and procedures not covered by CBHS Health Cover policies. For full terms, click here.
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