Tuesday, 29 June 2021
A new study out of the University of Otago has examined the financial vulnerability of older New Zealanders, with results showing Māori, Pacific Islanders, and women have lower levels of financial literacy, resulting in them being financially underprepared for their senior years.
The research complements the 2020 survey-based report from the New Zealand Financial Services Council that identifies negative outcomes related to lack of financial preparedness, including poorer mental health, relationship dynamics, physical health and overall wellbeing.
The University of Otago study, ‘Financial Literacy, debt, risk tolerance and retirement preparedness: Evidence from New Zealand’, showed people with better education were more financially literate and in-turn more likely to have less debt anxiety and higher risk tolerance.
The study supported previous research which found financial literacy is high in New Zealand, with 57 percent of older New Zealanders scoring well in testing through this study. However, females in the 55–59 age bracket and individuals of Māori or Pacific Island ethnicity with lower educational attainment, lower incomes, and high family responsibility had significantly lower levels of financial literacy and were more vulnerable to financial struggles in their senior years.
“For many people, lack of financial literacy sees them missing out on the ability to make positive financial decisions in their working years, resulting in tougher living conditions in their senior years,” says author Associate Professor Helen Roberts, of the Department of Accountancy and Finance at the Otago Business School.
“Overall, our findings suggest financial literacy is important for retirement preparedness and contrasts with previous research which has put forward that there is actually no correlation between financial literacy and retirement planning in New Zealand,” adds co-author, Associate Professor Ros Whiting, also of the Otago Business School.
Co-author Dr Jelita Noviarini noted how, similar to the COVID-19 situation, those who suffer most financially in their retirement generally have lower income and more anxiety about their debt levels. Provision for better financial literacy can help to improve financial health and overall wellbeing through positive decision making towards retirement planning, savings plans, and investments.
Financial Literacy, debt, risk tolerance and retirement preparedness: Evidence from New Zealand
Jelita Noviarinia, Andrew Coleman, Helen Roberts, Rosalind H.Whiting
Pacific-Basin Finance Journal