The importance of financial capability for the target cohorts

Young Australians

Instilling positive financial behaviours and habits in young Australians is critical to help them navigate ‘financial firsts’, such as a first job, first major purchases, and moving out of home. These behaviours can provide the foundation for future financial decisions and can set up young Australians for future financial success and financial resilience. We need to invest in building the financial capability of young Australians. That is why young Australians are the Government’s first priority cohort for the National Financial Capability Strategy.

Exposure to financial concepts within the home is the main source of young Australians’ financial capability building. Market research, commissioned by the Treasury in 2021, found that 82 per cent of young people reported that their understanding of financial concepts comes from conversations with parents and carers.[9] However, the research also found that many parents did not realise the full value of discussing financial concepts with their children or lacked the knowledge and confidence themselves to effectively have these conversations.[10] There are additional challenges facing young people who may not have strong parental support or are experiencing disadvantage. This highlights the need for additional support to improve young people’s financial capability, including a national conversation about the importance of building financial capability in young people and the fundamental role that parents and carers can play.

In designing financial capability‑building initiatives for young Australians, it is crucial they are tailored around key financial life events to maximise perceived relevance and usefulness. Initiatives should be designed and tested with young people, and their parents, to ensure information and tools are presented in an engaging, practical and accessible manner. [11]

It is also important to leverage different communication channels to engage young Australians. Young people today are digital natives (i.e. those born in the ‘online’ era) and are more likely to have higher digital skills and engagement than previous generations. Young people are well placed to take advantage of new financial technologies, such as online banking apps with integrated budgeting tools and savings goal trackers, that can help instil positive financial habits.

Finally, schools are also a key source of financial education, with around 50 per cent of young people reporting learning about financial concepts in school.[12] However, there is a desire amongst young people for increased financial education at school that focuses on practical and real‑life money management topics, with a need for content to focus on life stages or events that are most relevant (such as getting a first job).[13] The Australian Curriculum already includes some financial concepts and is currently under review by the ACARA.

The Curriculum is also supported by complementary in‑school programs that provide resources for teachers to incorporate financial capability learnings in the classroom. At the national level, this includes the ATO’s ‘Paying It Forward’ and ‘Tax, Super + You’ and ASIC’s ‘Moneysmart for teachers’ programs. Of note, there has been a decline in voluntary in‑school banking programs run by the private sector.


Women are a target cohort under this Strategy because women are still more likely than men to have low financial capability. In addition, a combination of structural factors has resulted in women experiencing economic disadvantage over their lifetime, relative to men.  Increased financial capability can help in addressing some of the economic challenges faced by women in their working lives, relationships, and retirement.

Australia has made significant progress towards increasing the financial and economic security of women. The Government is committed to increasing women’s economic security as one of three key priorities in the 2021‑22 Women’s Budget Statement. Despite this, women continue to experience lower levels of financial capability when compared with men and the longstanding inequality between women’s and men’s economic circumstances continues to influence women’s engagement with their finances.[14] According to HILDA analysis, when tested on the understanding of basic financial concepts, fewer than 48 per cent of Australian women were considered financially literate, compared with 63 per cent of Australian men.[15]

Women face accumulative economic disadvantage in their working life and have lower levels of workforce participation and a higher ratio of part‑time to full‑time employment, largely due to cultural norms around unpaid care for family. Women’s cumulative economic disadvantage is reflected in the gender pay gap and retirement income gap. The higher life expectancy of women also means their superannuation balances at retirement need to stretch further, highlighting the need to support women to effectively to manage their finances. The Government announced $10 million in funding to Ecstra foundation to provide grants to social enterprises and charities across Australia to build women’s financial wellbeing and economic security through employment and financial education. Additional initiatives aim to improve women's access to financial services and products, measure and track women’s economic security and inclusive financial education for young women from diverse backgrounds.

Women’s financial and economic security is influenced by societal, cultural, and economic challenges that have a significant impact on their personal finances throughout their lives. [16] Confidence around managing money is one issue, where the gender disparity is particularly pronounced, with over 40 per cent of women reporting that dealing with money is stressful and overwhelming, compared with 24 per cent of men.[17]

Providing women with the skills to recognise financially abusive behaviour is important to help protect against this form of family and domestic violence. A common sign of financial abuse is being excluded from financial decision‑making or having limited access to information about an individual or household’s money. Often the person affected by financial abuse may not recognise the perpetrator’s tactics as abuse or know how to protect themselves and their assets. [18]

Financial abuse can be just one part of a broader pattern of coercive or violent behaviour, and improved financial skills could help some women identify the signs of abuse. Preventing financial abuse is a priority under the fourth action plan of The National Plan to Reduce Violence Against Women and their Children. The National Plan recognises the complexities involved with domestic violence in various forms including financial abuse and outlines the Government’s commitment to long‑term targeted action to ensure the safety of women and children.

People in or near retirement

People in or near retirement are an important cohort to target because transitioning into retirement and living in retirement comes with its own set of financial decisions and circumstances that individuals may not have developed the capability to handle throughout their working lives.

While older Australians score better on average than younger Australians on financial capability, this does not mean that all retirees and soon‑to‑be retirees are making the right decisions to maintain financial wellbeing in retirement. Complexity and misconceptions have resulted in people not adequately planning for their retirement or making the most of their assets when in retirement. According to a survey of retirement intentions by the Australian Bureau of Statistics in 2020, there were almost a million people over the age of 45 without a plan to retire. [19]

Low financial capability is correlated with lower superannuation balances, lower willingness to take financial risk, shorter savings horizons, being less likely to set up a retirement plan, being less informed about pension rules, paying higher investment fees, and not diversifying pension assets. [20]

Improving financial capability will complement actions the Government has already undertaken to support people achieve better outcomes in retirement. For example, from 5 October 2021, providers of retirement income products are required to meet design and distribution obligations, which help to ensure that retirement income products are offered in a more targeted manner to retirees for whom they are suitable. Further, in September and October 2021, the Government consulted on draft legislation for the Retirement Income Covenant. The covenant will require trustees to have a strategy in place to assist their members to balance three key objectives, including maximising retirement income, managing risk, and having some flexible access to savings, from 1 July 2022. The Government will also deliver on its commitment to conduct a review into the quality, affordability and accessibility of financial advice in 2022.

For some retirees, particularly the elderly, financial abuse is also a risk. In 2019 the Australian Institute of Family Studies said it was likely that between 2% and 14% of older Australians were experiencing elder abuse in any given year, with financial abuse the most prevalent form. [21] The National Plan to Respond to the Abuse of Older Australians recognises financial abuse as one of the five common forms of abuse of older people. It sets out the commitment of the Commonwealth and State and Territory governments to undertake research and develop policy and law reform to address the problem of abuse of older Australians.

Aboriginal and Torres Strait Islander peoples

Enhancing the financial capability of Aboriginal and Torres Strait Islander peoples has the potential to contribute to progress on a few outcomes under the 2020 National Agreement on Closing the Gap (‘The Agreement’) and to the National Roadmap for Indigenous Skills, Jobs and Wealth Creation.[22] Financial capability, which improves outcomes, can contribute to longer and healthier lives, stronger economic participation and development of people and communities, and higher levels of social and emotional wellbeing. [23]

The Government is committed to working collaboratively with Aboriginal and Torres Strait Islander people to identify opportunities to improve financial capability in ways consistent with The Agreement. It is important to consider how initiatives can support Aboriginal and Torres Strait Islander people’s engagement with the financial system from a position of confidence, and in a way that maintains cultural identity and recognises the diversity of strengths, experiences and capabilities that exist. Ensuring initiatives are grounded in Aboriginal and Torres Strait Islander people’s cultural context is fundamental. It is also important to recognise the diversity of Aboriginal and Torres Strait Islander people’s context, including the very different experiences of those living in remote and urban areas.

Findings from 2018 financial resilience research observed that participation in proactive financial behaviours was lower for Aboriginal and Torres Strait Islander peoples. While some proactive behaviours are dependent on available resources, not all are. Over half of the sample reported they had found it hard to pay for everyday living costs in the past 12 months. [24] The research showed that over half of the sample read their bank statements regularly to check transactions and 39 per cent stuck to a budget or planned where their money would be spent.

Capability building can contribute to creating greater opportunities for Aboriginal and Torres Strait Islander people’s engagement in positive financial behaviours, helping to address financial wellbeing outcomes that are below average national levels. The Productivity Commission’s 2020 Overcoming Indigenous Disadvantage report noted improving financial literacy skills can contribute to available resources being used more effectively to improve overall financial wellbeing.

Building financial capability will complement actions already underway by the Commonwealth Government, state and territory governments, the Coalition of Aboriginal and Torres Strait Islander Peak Organisations and the Australian Local Government Association toward the Agreement’s objective of overcoming the entrenched inequality faced by too many Aboriginal and Torres Strait Islander people so that their life outcomes are equal to all Australians.


[9] Kantar Public (2021), “Youth Financial Capability Program Formative Research Findings”, commissioned by Treasury

[10] Ibid.

[11] Lusardi, A., et al. (2017) “Visual Tools and Narratives: New Ways to Improve Financial Literacy.” Journal of Pension Economics & Finance, 16 (3), Cambridge University Press, pp. 297–323.

[12] Kantar Public (2021), “Youth Financial Capability Program Formative Research Findings”, commissioned by Treasury

[13] Ibid.

[14] WIRE, Women Talk Money, 2020

[15] UWA, Financial Literacy In Australia: Insights from HILDA Data, 2020

[16] Commonwealth of Australia, Retirement Income Review, 2020

[17] National Financial Capability Survey 2021

[18] UNSW, Understanding Economic and Financial Abuse in Intimate Partner Relationships, 2020

[19] Australian Bureau of Statistics, Retirement and Retirement Intentions, Australia, 2020 

[20] Lusardi & Mitchell, 2014; Preston, 2020

[21] Carsen, R, Kasplew, R & Rhodes, H, Elder Abuse, 2018

[22] The 2020 National Agreement on Closing the Gap recognises that when Aboriginal and Torres Strait Islander peoples have a genuine say in the design and delivery of policies, programs and services that affect them, better life outcomes are achieved

[23] 2020 National Agreement on Closing the Gap. Outcomes referred to are One, Eight and Fourteen.

[24] Centre for Social Impact 2019, Money Stories: Financial resilience among Aboriginal and Torres Strait Islander Australians.