Last year, the average Australian scored 51 in this financial literacy quiz.
In 12 months, the bare minimum passing grade has slipped into fail territory, with the average Aussie scoring 48 out of 100 in the Financial Consciousness Index (FCI), commissioned by comparison website Comparethemarket and developed by Deloitte Access Economics.
The results from 3000 individuals suggest that 7.5 million Australians are struggling financially, nearly two million more than last year when the test was first run — they may be struggling to pay their bills, not saving money regularly, do not feel like they have job security and would feel financial pressure if they were to fall out of work.
The multiple-choice test measures various factors that make a person “financially conscious”, from sophistication and willingness to capability and wellness. It combines questions about interest rates, savings and investment strategies with more subjective ones like, “What best describes your approach to finances?”
The report found the higher the income and education, the higher the person’s FCI score, with those on less than $40,000 scoring 43 and those on more than $190,000 scoring 58.
Couples living together, with or without children, also had better FCI scores than singles, partly due to their higher combined income. Financial consciousness also grows with age but begins to drop off after 70.
Results were weighted for a score out of 100, placing Australians into one of five groupings associated with different levels of financial consciousness.
Under 35 is “don’t know what they don’t know”, 35 to 45 is “it’s a blur”, 45 to 55 is “conscious”, 55 to 70 is “rising up the ranks” and over 70 is “financially enlightened”, according to the report.
This year’s FCI reflects the “numerous events last year that were likely to negatively impact people’s financial situations and their ability to improve their circumstances”, Comparethemarket general manager of banking Rod Attrill said in a statement.
“The property market has suffered, the speculation of cash rate falls taking months to finally be announced swayed confidence, the banking royal commission has diminished people’s trust in financial institutions, and retailers have seen a significant slump in spending. The result is that Australians are feeling more uncertain and less confident about their future.”
Below are the questions and possible answers. To take the test yourself and find out your score, visit the website here.
FINANCIAL CONSCIOUSNESS QUIZ
Question 1: What do you think determines your ability to meet your financial commitments?
My investment and savings choices
• Sticking to my budget
• Economic conditions
• The financial position of my family
• Unforeseen events
• My understanding of financial matters
Question 2: Please indicate to what extent you feel you have control over the following aspects of your finances (“I have no control”, “I can somewhat control”, “My actions completely control”)
• Investment outcomes
• Day-to-day purchases
• Retirement outcome
• Ability to pay the bills
Question 3: What best describes your approach to finances?
• I budget and I stick to my budget
• I budget and try my best to stick to my budget
• I budget but do not stick to it
• I don’t budget but watch what I spend
• I don’t budget and typically do not watch what I spend
Question 4: Suppose you had $100 in a savings account and the interest rate was 2 per cent per year. After five years, how much do you think you would have in the account if you left the money to earn interest?
• More than $102
• Exactly $102
• Less than $102
• I don’t know
Question 5: Suppose the interest rate on your savings account was 1 per cent per year and inflation was 2 per cent per year. After a year, how much would you be able to buy with money in this account?
• More than today
• Exactly the same
• Less than today
• I don’t know
Question 6: Is this statement true or false? “It is usually possible to reduce the risk of investing in the stock market by buying a wide range of shares”
• I don’t know
Question 7: When making significant financial decisions, who do you typically consult with?
• No one, I make my own financial decisions
• My partner, we make financial decisions together
• Financial professionals (e.g. accountant, financial planner)
• Other family or friends
Question 8: Which of the following short or long-term budgets/financial plans do you have?
• Weekly budget
• Monthly budget
• Annual budget
• Financial plan for the year
• Financial plan for two years or more
Question 9: How many super funds do you have?
• Three or more
• I don’t know
Question 10: How often do you monitor RBA cash rate announcements?
• Not very often
• All the time