ASIC is reviewing the National Financial literacy Strategy, and the FPA has called for the advice profession to help improve financial literacy for all Australians.
The FPA is concerned that lack of financial literacy and understanding could cause Australians to rely too much on Government policies that may not be in their best interests.
Further concerns were raised that the establishment of MySuper and the National Disability Insurance Scheme (NDIS) could make Australians complacent and “potentially create a false sense of security”.
“It is appropriate that Australians understand the benefits of DisabilityCare but it is equally imperative that they understand and are aware of the limitations. This initiative does not replace the need to have adequate and appropriate insurance protection.”
As well as being impersonal, MySuper cannot guarantee that Australians will have enough for super, and it is no more than a safety net, said the FPA.
Possible actions to improve financial literacy included training teachers to teach financial literacy in schools, as well as increasing the number of financial counsellors to provide targeted guidance and support to those most at risk.
The FPA suggested that greater focus should be placed on those who are disadvantaged and may not have access to tools and resources. The list of groups that should receive greater focus included the long term unemployed, those suffering from illness and injury, retirees reliant on the age pension, migrants, and young people who may be disadvantaged.
“There is potential to establish a more formal program to facilitate financial planners to work with local schools to assist teachers with improving the financial literacy of students.”
The consultation paper provided the following definition for financial literacy:
“Financial literacy is a combination of financial awareness, knowledge, skills, attitudes and behaviours necessary to make sound financial decisions and ultimately achieve individual financial wellbeing.”
The FPA believed that this should be strengthened to include a person’s right to 'access' and 'financial inclusion'.
Trusted adviser or teacher?
Tapping into the next generation: A specialised approach
Financial planning to be taught at school: How will this affect advisers?