Aussies failing basic financial literacy; Bank accounts running dry

nab — Customers withdraw money from National Australia Bank (NAB) Automatic Teller Machines (ATMs) in central Sydney, Australia, July 24, 2015. Reuters/David Gray/File photo

A recent survey has revealed that Aussies have low knowledge in basic financial literacy. More than one thousand Australians participated in ME’s survey, which found that 13 percent said their banking knowledge was “below average,” and 60 percent failed a quiz about basic banking literacy.

Nic Emery, ME head of transactional and deposits banking, said that the result suggests Australians making poor decisions when it comes to banking. He explained that some people fail to financially educate themselves because they find banking too complex. Others, meanwhile, find working with numbers difficult.

“But like it or not, banking is part of our daily lives and understanding the basics is a life-skill, like being able to cook and catch public transport,” Money Management quotes him as saying. The survey also showed that 35 percent did nothing to educate themselves on banking products and services.

Furthermore, the findings showed that 74 percent do not have an idea what a comparison rate was. Seventy percent were not aware that putting a car purchase on a lengthy home loan may cost more than a separate personal loan, and 43 percent do not have an understanding of compounding interest as well as the benefit of being patient with savings.

Emery advised Aussies to get informed. He cited the government’s MoneySmart website and ME’s engaging online school of money as educational options. Another option is to see a completely independent adviser such as an accountant or consider taking up a course.

Bank accounts running dry

Meanwhile, a different research has found that one in every three Aussies admit they regularly run their bank accounts dry. Research by financial comparison site Canstar also found some people saying they could not meet their ends meet.

According to Canstar spokeswoman Belinda Williamson, the findings were “worrying.” A cause for concern is to see how close to broke a person is. Williamson added that new technology has made the exchange of money out of sight for several people. It should be more important to know one’s budget and balance.

Banking customers are advised to check their accounts regularly for irregularities. AMP financial planner Dianne Charman recommended Aussies to make it a habit to leave themselves a financial buffer of at least three months’ worth of pay, news.com.au reports. This will ensure they do not cut it too fine financially.

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