More households are taking accountability for their financial situation in 2020.
More than one-third now have an emergency fund, they save an average 16 per cent of their income, spend an average 47 per cent on essentials, and more are insuring their health and families.
The Index, commissioned by comparethemarket.com.au and developed by Deloitte Access Economics, tested 3015 Aussies on factors that make them financially conscious. This includes financial willingness, how much an individual is motivated to make financial decisions, and financial accountability.
The report found that more than a third (37 per cent) of Aussies this year have an emergency fund, compared with 32 per cent last year. More NSW and Tasmanian residents have funds set aside, at an equal 39 per cent, compared with 32 per cent of ACT residents.
Individuals are also saving an average 16 per cent of their incomes – three per cent more than last year. A smaller proportion are now living hand to mouth: 14 per cent of Aussies admit they save nothing – four per cent lower than last year.
“Australians have become more financially conscious and understand that the actions they make now will impact their future financial position, particularly during this time of economic crisis. Government assistance and payment deferrals will eventually come to an end and we are seeing many consumers do what they can now to get on top of their debt and spending.Comparethemarket.com.au General Manager of Digital Banking, David Ruddiman
“With the average household debt reaching $183,900 before the pandemic, and likely to grow as a result of the downturn, it has been a wake-up call for millions to look at what they can do to be better placed financially.”
More Aussies are getting insured for peace of mind
In this climate of uncertainty, more Aussies are safeguarding against the unknown by taking up insurance. This year, 71 per cent of respondents reported having car insurance, up three per cent from last year, and a fifth (21 per cent) have life insurance, compared with 19 per cent last year.
Interestingly, NSW and Victorian respondents have the lowest rates of car insurance – 65 and 75 per cent respectively – despite being one of the most populated and congested cities, compared with an equal 79 per cent of SA and Tasmanian respondents.
Despite recent figures showing a continued decline in private health cover membership, 54 per cent of respondents have health insurance this year, compared with 48 per cent last year. While membership is declining among younger generations, the percentage of older age groups taking out cover is increasing. A higher proportion of West Australians (61 per cent) and Tasmanians (60 per cent) are now insured for their health, while Queenslanders have the lowest rates of health cover, at 47 per cent.
David says: “The pandemic has shown people the importance of thinking one step ahead should things go wrong. More than 492,000 households have taken mortgage holidays and 4 million early release super payments have been made so far, which demonstrates many people are doing what they can now to minimise outgoings and increase their savings pot, to put themselves in a stronger position should the economic downturn be prolonged.”
Aussies are concerned about their retirement nest egg
With stock markets taking a hit this year, people are understandably concerned about their superannuation. As a result, Aussies are checking their super balances more regularly. Last year, 33 per cent of Aussies checked their super balance monthly, compared to 37 per cent this year.
Aussies are becoming more accountable of their financial actions
A higher proportion of households feel that their actions control the outcome of their personal finances. Forty-five (45) per cent of Aussies said their day-to-day purchases are completely controlled by their actions, up from 40 per cent last year. More Aussies this year (38 per cent) also know that their debt levels are mostly determined by their actions – a four-per cent increase on last year. Furthermore, 34 per cent said their ability to pay bills is based on their actions, up 3 per cent on last year.
David concludes: “There has never been a more crucial time for consumers to increase their level of financial consciousness and take control of their financial situation. Individuals can start by taking our Financial Consciousness Test to understand how they score for financial conscious. I also encourage them to review rates across their various insurance and financial products to ensure they are getting value. Now is the time we should be looking at how we can reduce spending and increase savings.”
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