Takeaways from the Savvy 2020 Financial Literacy Survey
Here are some insights and tips looking at our survey on financial literacy in Australia – and how you can make better financial decisions for you and your family.
A Majority of Australians Pay Their Credit Cards on Time
Most respondents to the survey said they have a credit card (55.6%) and of those, 51.3% said they paid off their credit cards on time.
So, what about the 48.7% who said they don’t?
Most credit cards have high interest rates that carry on from month to month – this is known as “revolving” credit. If you have a balance of $3,000 and only pay off the minimum – 2-5% in most cases – this will add more interest to your bill each month. Let’s imagine that you have that balance, pay 2% each month (the minimum) have a middle-of-the-road interest rate of 18%p.a.
It would take you seven years and ten months to pay off the balance – by which point you will have paid $2,586 in interest!
That interest could be better spent on saving for a holiday, saving for an emergency, a new appliance to replace a broken one, a deposit for a car, or investments.
If you have credit card debts that you are struggling to get on top of, you may want to consider consolidating debts with a personal loan.
Consolidating debts using personal loans
You can consolidate smaller debts such as credit cards using personal loans. You will have to talk to a broker and apply for a personal loan which will “wipe out” the credit card debt, effectively transferring it into a personal loan. A personal loan has significantly lower interest rates than credit cards and each payment you make gets you closer to being debt free.
Using the above example, a five-year personal loan at 10%p.a. will only attract $834 in interest – a massive saving of $1,732!
Auditing your finances
To help prevent getting into financial trouble, you should audit your finances at least once a year. That means looking at your income and where you are spending your money. 41.2% said they’d never audited their finances; this should be preparation for taking on major investments (a house, for example), whether your family wants a child, and general financial health.
Four in five Australians have never seen a Financial Adviser
83.9% said they’d never seen a financial adviser – though financial advisers can charge a lot, it’s an investment in your own financial literacy as an Australian and as someone who wants to grow their wealth. The 53.3% of respondents who say school should intervene won’t cut it – once we get to adulthood, we need to take responsibility of our finances and wealth and just like getting a personal trainer for fitness, a financial adviser is like a “personal trainer” for wealth.
