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Your Financial Wellness

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As banks begin their six-month check in with borrowers on deferred mortgages, financial stress is widespread across Australia, according to the latest preliminary research findings from Your Financial Wellness (YFW).

Data from YFW from the third quarter of 2020 found that just under 1 in 2 (47 per cent) customers reported some level of financial worry, with 2 in 5 (44 per cent) indicating a lack of confidence in managing day to day expenses.

Over 1 in 4 (26 per cent) reported high or overwhelming levels of financial stress, and only 1 in 5 (21 per cent) reported feeling fully financially satisfied.

Given the fact that Australia is now officially in a recession due to the health pandemic, these insights on financial wellbeing will only become more important as banks and governments continue to manage economic fallout.

In fact on Monday, the Australian Banking Association also announced that the six-month loan assessment has begun by the banks. Of the 900,000 loans that have had payments deferred, 13 per cent had already resumed repayments by the end of July.

YFW is a platform that was set up with the vision of improving financial wellness in Australia and exploring the real-life impact that financial literacy and wellness education can have on Australians.

YFW uses a data-based approach to empower consumers with their own financial information.

The YFW platform and the financial wellness index are being validated by the University of New South Wales (UNSW) with a view of supporting longitudinal analysis.

“Drilling down, analysis to date indicates that there are five main factors that have a major influence: gender, age, income/ work status, relationship status and home ownership,” YFW, manager of strategy and insights Mike Roberts said.

“Perhaps the most striking early finding is the significant variance by gender, with data showing that women report significantly lower levels of financial wellness than men.

“As we grow our user base we plan to conduct more detailed analysis that will provide insights and information to help inform policy makers about the factors that result in the financial wellness gender gap”.

The data highlighted that on average, women have a lower YFW Index score of 6.1 compared to men who have a YFW Index score of 6.7.

Women also reported higher levels of financial stress, and men report twice the level of superannuation savings compared to women.

YFW is also working with Professor James Arvanitakis from Western Sydney University, who is interested in the dataset YFW captures and its potential to provide insights into factors that influence financial wellness.

Arvanitakis sees that YFW is important for a number of reasons, explaining that “YFW is measuring something that is not often captured, it provides really powerful insights.

It is also identifying areas of concern such as financial stress that can lead to social disharmony. These are real challenges and there needs to be active response on behalf of governments and organisations in the community sector. Things don’t just get better on their own".

There are some concerning numbers that we should be reminded of, and these are likely to get worse during COVID-19, Professor James Arvanitakis, Western Sydney University

Arvanitakis is particularly interested in the insights coming out of the YFW datasets to do with gender, and said “the dataset reinforced and extended previous research, that there is a financial wellbeing gap between women and men. This is an important one to keep getting reminded of because there are a whole series of vulnerabilities that we need to be aware of”.

The YFW data also showed that age has a relationship with financial wellness, where those aged 20-39 have a lower YFW Index score on average, and the score increases with age.

The score also increases with personal income, where those with higher income are less likely to report high levels of financial stress, however when looking at occupation, customers who are unemployed or in carer roles have the lowest financial wellness.

Another interesting area, said Mike Roberts, was “the significant importance of home ownership in underpinning financial wellness, so I guess you could say the Aussie dream is still alive and well”.

Again it also comes at a time when the banks are starting to engage with borrowers who are on mortgage deferrals.

Roberts highlighted why the YFW data set is so valuable, explaining that the belief of YFW is that “by using these social insights, a financial institution will be better placed to understand the mental and financial journey their customers undertake and actually be seen as trusted adviser.

“The information held by Your Financial Wellness includes a significant breadth of financial and psychographic data – as we collect and analyse this unique dataset, some ground breaking insights will be uncovered. We are particularly interested in looking at how wellness will change over time, especially from the perspective of coming out of COVID-19”.

Arvanitakis reinforced this sentiment, concluding that the reason he is working with YFW is “because I think there are important financial trends that will have social impacts we need to understand.

"There are some concerning numbers that we should be reminded of, and these are likely to get worse during COVID-19.

"I really believe that education is all about empowering people so they can take control of their lives. Nothing is more important than financial education”.    

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