New research commissioned by Ecstra Foundation shows that many countries, including Australia, continue to grapple with how to improve financial literacy in the face of economic and social headwinds. The findings suggest that Australia could learn a lot from the approaches of other countries.
The report, International Approaches to Progressing Financial Capability, by Social Ventures Australia (SVA), looks at international trends in financial literacy and capability, and identifies key ideas and approaches that may be relevant to the Australian context.
This includes the widespread development and adoption of National level strategies, with the report stating that “more than 70 countries and economies worldwide, including the majority of G20 nations, were designing or implementing National Strategies for financial literacy” as at 2020.
However, in contrast to many OECD peers, Australia’s National Financial Capability Strategy is currently inactive.
“Despite the efforts of a broad range of stakeholders focused on financial capability activities, Australia’s financial literacy levels[1] are not improving, particularly among younger people. There is a risk we could fall behind globally if action is not taken,” says Caroline Stewart, CEO of Ecstra.
“This is particularly concerning against a backdrop of cost-of-living pressures, as Australians are navigating multiple challenges, economic inequality and the continued proliferation of financial scams.”
Louise Campbell, director of SVA Consulting, says” “Our environmental scan and analysis shows these challenges are not unique to Australia and there are tangible ways to address a range of issues.”
The research identified five key opportunities for Australia:
- Recommit to a National Strategy for financial literacy and capability - including concrete goals and targets, sustainable funding and outcomes measurement.
- Map stakeholders, initiatives and funding to better understand the financial capability ecosystem and to identify gaps and opportunities.
- Convene stakeholders to ensure collaborative action. This includes community and consumer organisations, educators, academics, peak bodies, philanthropic partners, industry and government.
- Ensure students have access to quality, evidence-based financial education in all schools across Australia.
- Continue to engage in international initiatives addressing financial capability (e.g. PISA, OECD International Network on Financial Education).
Ms Stewart notes: “National strategies are complex, long term public policy projects. Given the many drivers of financial capability, the range of players involved and policy intersections, government leadership is critical for setting a clear, unified vision and roadmap.“
Ms Campbell agrees that the role of strong leadership cannot be understated when “the complexity of stakeholder coordination was raised as the greatest challenge across all jurisdictions. Clear leadership and effective coordination of activities and policy alignment is a success driver for better financial literacy outcomes.”
Simple, effective actions many countries have already taken include mandating dedicated financial education in schools.
In the US for example, 35 states now require students to take a personal finance course to graduate from high school. The New Zealand government recently announced its intention to make financial literacy compulsory in schools from 2025. This follows trends in many Nordic countries, where financial education is mandatory and higher overall financial literacy rates have been achieved.
Ms Stewart says: “Ecstra runs the largest face to face financial literacy program offered in schools across Australia however a whole systems change approach is needed. We reiterate our call for the government to lead a national financial capability action plan that includes elevating the importance of financial education.
“There are many stakeholders working on financial capability and wellbeing. This provides a strong base for championing a renewed approach to building financial capability to improve the lives of all Australians.”
