financial literacy

Raising financial literacy in Australia. Education vs Information

Financial literacy is all about understanding how money works in the world, how to manage it and how to invest it.  Australians need sufficient background in financial literacy so that they are able to make informed choices about the way in which they use money, use financial products and make investment decisions.   The problem is that the level of financial literacy in Australia is poor, reflecting an inadequacy in our education system.

Financial literacy as applied to investing can be improved in two ways, through education and information.  There needs to be a clear understanding of the difference between financial education and financial information. Not all investors need or want investment education and for many people investment information is all that is required.

Financial education aims to raise the level of financial literacy through a series of planned and relevant courses at different levels. … Continue reading

Baby-boomers, financial scams and education

Investment scams are commonplace and despite regulation will undoubtedly continue. Recently REST Industry Super, a large Australian industry super fund commissioned a study of Australian baby-boomers. The study showed that there are between four and five million baby-boomers who are now starting to retire and this creates a serious issue for future Australian governments since only 14 per cent of Australian Baby Boomers feel financially prepared for retirement with 35 per cent saying they are completely unprepared.

When potential retirees become aware of their lack of preparation they will often try to find investments with higher returns without considering the higher risks that come with such investments which almost inevitably end badly. Many of these high return investments are outright scams. Investor vulnerability to scams is not confined to the poorly prepared retiree. A recent example of this was the Madoff Ponzi scheme in the United States where an estimated… Continue reading

Extended life expectancy and financial literacy.

We are all aware that life expectancy has increased dramatically over past decades due to medical advances etc.  The data below from the US Social Security Administration show the life expectancy for males at age 65 in the US and compares the data for 1986 and 2006.  Life expectancy in the US has been extended by 5 years in just two decades. 

The interesting but perhaps not surprising fact is that there the higher earning individuals have had a very significant increase in life expectancy compared to those of lower earning status. 

It is reasonable to assume that there has been a similar trend in longevity in Australia, with the average male living to age 86 and that will continue to increase. There is an important consequence of these data.  Those with a higher earning capacity are the persons whom the government expects to be… Continue reading

A critical need for investor education

An interesting article in by Robert Gottliebsen the Business Spectator today

The poor performance of finance professionals though managed funds is setting Australia up for a pension crisis in the future and should be investigated as a matter of urgency. It seems from Gottliebsen’s article that more and more Australians are setting up self managed super funds and are doing better than the professionals.  This of course creates a big headache for the big fund managers.

There really is a critical need for investor education in Australian.  Without investor education a large number of Australians will have no choice but to invest with the large funds and if they continue to have similar results these Australians are not likely to enjoy a self funded retirement.

Australians lack financial literacy

The education system does not equip Australians to become financially literate. As a result most Australians are uncertain about how to invest and many find it intimidating.

The finance industry spends large sums to promote the complexity of investing and seems to have successfully convinced the average Australian that investing is too difficult and that only finance professionals can be successful investors.   This is despite the evidence to the contrary, that most fund managers underperform the index and in some instances their long term performances can only be described as a dismal failure. .

The big concern is that future generations of Australians will not have access to a government pension unless they are in very poor circumstances.  So it is essential that Australians be educated in the ways of saving and investing

This is a prime objective of the independent investor.  It… Continue reading

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