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Latest Financial Capability Study Proves Knowledge Is Power, With Positive Findings For Māori

Thursday 22, July 2021: Te Ara Ahunga Ora Retirement Commission has today released its latest survey into the financial capability of New Zealanders. The survey, which canvassed over 3,000 New Zealanders, informs New Zealand’s National Strategy for Financial Capability and feeds into projects to improve financial capability outcomes for New Zealanders. The study found four key headlines including:

  • a person’s financial knowledge, behaviour and psychology can have a greater influence on their overall financial wellbeing rather than how much they earn, how old they are or what ethnicity or gender they identify with.
  • Māori convert the same level of knowledge and resource into greater financial wellbeing than Pākehā. Therefore, investment in Māori financial capability is likely to bring disproportionately higher payoffs for this group’s financial wellbeing.
  • Two thirds of New Zealanders make poorly informed choices about financial products and more than 85 percent of us don’t have enough knowledge to compare the terms and conditions of a credit or insurance product.
  • 41 percent of Kiwis don’t check the terms and conditions of financial products at all.

Commenting on the study, Retirement Commissioner, Jane Wrightson, said, "The big picture remains unchanged. Older, Pākehā men continue to have the highest financial wellbeing in New Zealand. Māori and Pacific peoples have the lowest, followed closely by people living with a long-term health condition, impairment or disability, and then women."

"But the research also shows us how knowledge, behaviour and an individual’s mindset influence financial wellbeing," she said.

The study is a deep dive in 21 components of financial capability and looks at things like:

  • how many Kiwis borrow to meet their day-to-day expenses eg, 17 percent of us use credit cards often, very often or always to pay for food and other needs.
  • how impulsive we are eg, people earning below $30,000 have better impulsivity control than those earning more than $100,000.
  • how good we are with budgeting eg, 69% of us plan our spending.

Power to the People

The research showed that many of the factors that help to determine overall financial wellbeing are things which individuals have the ability to positively influence.

This included:

  • Control: one in five New Zealanders believe their financial situation is largely outside their control, with the exception of people on very low incomes not solved by financial capability alone. But the research found that financial confidence and a higher Locus of Control (how much influence we think we have) for those with adequate incomes can positively impact our overall financial well-being.
  • Knowledge: Better financial knowledge and experience can positively shift overall financial wellbeing.
  • Financial psychology: In turn working on psychological aspects, such as procrastination, can improve financial knowledge and experience.

Opportunities to Increase Knowledge

One of the big gaps identified is our knowledge of financial products. The findings found that:

  • Two thirds of New Zealanders make poorly informed choices about financial products and more than 85 percent of us don’t have enough knowledge to compare the terms and conditions of a credit or insurance product.
  • 41 percent of Kiwis don’t check the terms and conditions at all.

Te Ara Ahunga Ora says the way financial information is presented in New Zealand is undoubtedly a contributing factor. It is calling on everyone in the industry - from major banks and insurers through to pay-day lenders and businesses offering consumer credit - to get onboard with New Zealand’s National Strategy for Financial Capability and make sure all information they put in front of consumers is clear, easy to understand and has terminology and explanations consistent across the industry.

"This research has highlighted a range of opportunities to improve the financial wellbeing of all New Zealanders. For example increasing our knowledge of and confidence in financial matters and tackling some bad habits such as procrastination or impulsivity, could improve New Zealander’s financial wellbeing. Clearer terms and explanation of debt and credit products will also make a big difference, " says Ms Wrightson. "The findings from the study will enable us to focus resources on the things that can turn the dial the most for those currently lagging behind. The next step for us on that journey is Money Week from the 9th - 15th August, where New Zealanders will be provided with a range of resources to empower them around their finances."

Research | Retirement Commission Te Ara Ahunga Ora

About the study

The study uses a well-tested methodology developed at the University of Bristol by Professor Elaine Kempson (the leading financial capability researcher in the world) and used by countries including Australia, Norway, Canada and Ireland.

Previous research conducted by Te Ara Ahunga Ora measured New Zealander’s subjective financial wellbeing. The 2021 study is more in-depth, separately measuring specific knowledge, behaviour and skills. The research can pinpoint opportunities to improve the financial wellbeing of three priority groups - Māori, Pacific peoples and women.

Administered by Dynata Ltd, Te Ara Ahunga Ora’s financial capability survey 2021 was fielded between 26 February and 19 March 2021. The sample (3,027) reflects New Zealand’s adult population and was based on the Research Now panel, which is a selection of people over the age of 18 who are randomly recruited through multiple channels. The panel recruits by both open- enrolment and invitation-only models, and recruitment campaigns are designed to specifically target hard-to-reach population segments by applying tailored campaigns. Panellists are rewarded for taking part in surveys with a structured incentive scheme, reflecting the length of the survey and the nature of the sample. Panellists are supported by a dedicated team and have the option to unsubscribe at any time. Panel management is compliant with industry standards, and data protection and privacy laws. The size of the panel (250,000) allows researchers to draw representative samples, and since the panellists’ background characteristics are already mapped, it is possible to address the survey directly to the target population.

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