Men rate more highly than women in basic financial literacy but when it comes to more advanced knowledge of investment matters both genders are lacking, the first Australian study to test advanced financial literacy has found.
Professor Natalie Gallery, from Queensland University of Technology's School of Accountancy, said the survey results suggest Australians needed advanced financial literacy education to understand the basic investment concepts so that they could make informed decisions.
Her research team conducted an online survey of 2046 members of Queensland government employees' superannuation fund, QSuper, on their knowledge of investment matters in relation to decision-making on their own financial future.
Professor Gallery said the research team surveyed respondents on basic understanding and knowledge of general financial matters and investment-related matters as well as more advanced knowledge on investment products.
"The questions were designed to ascertain members' retirement readiness, understanding of general financial matters, sources of financial information for super and investment decision-making and superannuation knowledge," Professor Gallery said.
"We consider basic level financial literacy to comprise such aspects as understanding compounding interest, differences between credit card and home loan interest rates, and the need to diversify investments.
"We found that women, younger members, those with lower levels of education, people who were renting or living with their parents and those with lower super account balances generally rated low on these basic measures."
The researchers also surveyed the same members on advanced financial literacy related to their understanding of the eight investment options for superannuation available to them at the time of the survey.
"The study found a high proportion of respondents could not correctly identify the risks of these investments, they were better at picking them by their returns," Professor Gallery said.
"While we found a clear distinction on basic literacy between men and women, at the higher level there was less differentiation between the two, with either gender achieving relatively low scores.
"Also, those who rated their financial literacy higher tended to achieve lower scores on the objective tests for advanced investment literacy, indicating there could be over-confidence in skills on advanced investment matters."
The study also compared the results for basic level financial literacy with the 2005 ANZ Survey of Adult Financial Literacy in Australia and found QSuper members tended to score more highly than the general population.
"This difference could be attributed to the fact that the QSuper respondents are generally better educated and have higher incomes than respondents to the national ANZ survey," Professor Gallery said.
"The QSuper members who responded to the survey also tended to be older and on higher salaries than the general QSuper population.
"Members who use QSuper sources of information, and those who sought advice from financial experts and read financial publications had higher levels of literacy on all measures.
"In contrast, those who used product disclosure statements tended to be less financially literate in more advanced investment matters."
Professor Gallery said the study findings would be used by QSuper to help develop its financial literacy education programs and member communications, and to target them to members with lower financial literacy levels.
"Further research will also be undertaken to assess changes in financial literacy over time," she said.
QSuper, headed by CEO Rosemary Vilgan, has more than 490,000 members and around $25 billion in funds under management.
Media contact: Niki Widdowson, media officer, 07 3138 1841 or n.widdowson@qut.edu.au.
** High res photo of Professor Gallery available for media use.
