RaboDirect Financial Health Barometer
A Five-Year Review
RaboDirect Financial Health Barometer – A Five-Year Review
About the white paper
RaboDirect’s annual Financial Health Barometer delivers a comprehensive overview of
Aussies’ attitudes towards their financial health.
Each year the survey records the attitudes of more than 2,000 financial decision makers
aged between 18 and 65. Results are weighted by gender, age and location, according
to statistics from the Australian Bureau of Statistics. The survey is conducted in order to
empower Aussies to better understand and improve their financial situation.
This white paper is a longitudinal report into the key insights from RaboDirect’s Financial
Health Barometer over five years, covering results from 2011 – 2015. This is the first time
that a retrospective look at the findings has been undertaken since the survey started in
2010.
10,000
financial decisions makers over 5 years
Aged between 18 and 65
1
Introduction
While Aussies know that they have to save for a comfortable retirement or a rainy day,
their attitudes towards saving and financial wellbeing are changing. Sentiment is driven
by a range of factors including the perceived health of the national and global economy,
wage growth and fluctuations in the local cash rate. Also, how financially literate a person
is affects the way they think and feel about their financial health. Frankly, there’s much to
weigh up and balance out.
RaboDirect Financial Health Barometer – A Five-Year Review
Please indicate the extent to which you agree or disagree with each of the following
statements
“Financial planning is only important for those who have a lot of money”
90%
At RaboDirect we’ve documented the changing attitudes of Aussies to their financial
health, through our annual Financial Health Barometer survey. The RaboDirect Financial
Health Barometer – A Five-Year Review, is the first retrospective look at findings providing
fascinating insight into the financial behaviour of Australian consumers over the last five
years.
The white paper uncovers how people’s confidence in their savings and their financial
settings can shift in response to changing economic conditions. It explores the use
of financial advice, consumers’ opinions of the advice industry, their expectations of
retirement savings, and their confidence – or lack thereof – in money matters.
The research shows that as a whole, Aussies have become less confident and less
engaged with their finances.
The results profile Baby Boomers as the least financially confident and engaged
generation, while on a gender basis, women continue to have less than men in retirement
savings and aren’t as confident when it comes to their overall finances.
Concerningly, expectations about how much people plan to have in their super accounts
when they retire has fallen over time. The research found that in 2014 Baby Boomers said
they expected to have $452,310 falling to $309,077 in 2015.
Confidence in the financial advice process is also slipping. In 2015, 29 per cent of
respondents agreed or strongly agreed that they trusted financial advice down from 40
per cent in 2014. The average score across the five years was 31 per cent.
What’s more, almost twice the number of people now think that advice is “only for the
wealthy,” compared to when the survey was done in 2012 (28 per cent versus 17 per cent).
4%
100%
13 %
3%
14 %
4%
15%
18%
80%
24%
29%
70%
5%
20%
29%
60%
8%
27%
35%
50%
40%
30%
40%
39%
37%
37%
27%
20%
10%
18%
15%
15%
12%
0%
2011
Disagree strongly
2012
Disagree
2013
Neither agree nor disgree
2014
Agree
10%
2015
Agree stongly
So are Aussies really losing interest in their finances and applying less sense to their
dollars and cents? If so, the implications could go far beyond having a smaller savings
balance. A growing disinterest with finance could lead to falling levels of prosperity,
potentially impacting Australians’ health and wellbeing, their quality of life in retirement
and overall happiness. And that can’t be a good thing.
Through laying out these trends, this white paper highlights a growing need to
reinvigorate Aussies’ confidence in and energy around their finances to help make the
most out of every dollar they have, so they can make the most out of life.
The following section provides the evidence; the ‘meat’ that substantiates our insights
and conclusions. It’s a comparative and detailed analysis of RaboDirect’s Financial Health
Barometer over the past five years, covering:
• Superannuation and retirement expectations
• Attitudes towards financial advice
• Consumer confidence
2
Superannuation
Behind the family home, superannuation remains Australians’ most valuable asset. Often
the reality of how much people have in their super, versus the perception of how much
they think they’ll need, is an indicator of how financially informed they are. The research
shows that over the five years, expectations about how much is needed to retire has
tumbled, with fewer Australians going above and beyond to grow their super nest egg.
On average, the number of people making voluntary superannuation contributions fell
between 2013 and 2015, particularly among the Gen X and Baby Boomer groups. In 2014,
33 per cent of Gen X and 27 per cent of Baby Boomers had made voluntary contributions:
in 2015 these figures fell to 24 per cent and 21 per cent respectively.
RaboDirect Financial Health Barometer – A Five-Year Review
In the last 12 months have you made any voluntary contributions to your
superannuation fund(s)?
Yes. By gender
37%
40%
35%
32%
31%
30%
29%
26%
25%
21%
29%
26%
21%
20%
ON THE FLIP SIDE, MORE AND MORE GEN Ys ARE MAKING
CONTRIBUTIONS INTO THEIR SUPER, WITH 32 PER CENT
MAKING VOLUNTARY CONTRIBUTIONS IN 2015, UP FROM 29
PER CENT IN 2014
The survey continues to show a major difference between male and female super
balances in Australia, highlighting the need for women to make additional contributions.
However, the research shows that men have consistently contributed more to their super
than women. Only one in five (21 per cent) women made voluntary super contributions
in 2014 and 2015, compared to more than 30 per cent of men in the same period (37 per
cent in 2014 and 31 per cent in 2015).
15%
10%
5%
0%
Male
Female
2013
2014
Total
2015
What’s worrying, the research shows that the amount Aussies think they’ll have to retire
on is below average industry estimates and is declining. ASFA estimates the lump sum
needed to support a comfortable lifestyle for a couple is $640,000 (or $545,000 for a
single person) assuming a partial Age Pension2.
In 2012, Gen Y expected to retire on $514,798, Gen X expected to retire on $462,444 and
Boomers expected to retire on $404,865; by 2015 these figures had fallen by 13 per cent,
8 per cent and 23.5 per cent respectively.
1
An update on the level and distribution of retirement savings, Association of Superannuation Funds, March 2014
2
ASFA Retirement Standard, June Quarter 2015
(https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/super-contributions/howmuch-is-enough)
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RaboDirect Financial Health Barometer – A Five-Year Review
How much do you expect to have in superannuation when you retire?
Average. By generations
How much in total in superannuation would you estimate an average retiree at the
age of 65 would need for their retirement until they are 85 years
(for 20 years)?
$700,000
$600,000
$514,798
$462,444
$500,000
$400,000
Average. By generations
$569,872
$486,442
$516,658
$499,518
$404,865
$447,776
$463,221
$423,706
$452,310
$470,485
$1,100,000
$460,759
$436,274
$1,200,000
$1,000,184
$1,000,000
$398,707
$300,000
$309,077
$800,000
$700,000
$100,000
Gen Y
Gen X
Baby Boomers
Total
$849,395
$907,838
$844,396
$697,353
$829,087
$886,286
$785,768
$749,291
$761,481
$675,685
$600,000
$0
$906,838
$932,110
$784,421
$200,000
$909,441
$875,253
$900,000
$500,000
$400,000
2012
2013
2014
2015
Gen Y
Gen X
2012
In 2015, respondents felt they needed less money to retire on than was the case in
previous surveys. We also found that a growing number of Gen Ys believe that employerfunded superannuation will be enough to cover their retirement needs: this proportion
increased more than twofold, from 12 per cent in 2011 to 28 per cent in 2015.
Our research shows that in 2012 Gen Y said they’d need $784,421 to retire on, but this
figure fell 14 per cent in 2015. Gen X said they’d need $875,253 to retire on in 2012, but
only $844,396 in 2015 – a drop of four per cent. In 2015, Boomers indicated they’d need
$785,769 to retire on, down 13 per cent from 2012.
2013
Baby Boomers
2014
Total
2015
The declining perception of how much super is needed to support a comfortable lifestyle
in retirement is concerning because the cost of living in Australia is rising, with the
country topping Deutsche Bank’s list of the most expensive countries since 20123. As well,
investor returns from cash and fixed interest remain subdued, considering the Reserve
Bank of Australia’s cash rate has remained at record lows of two per cent since May 2015
after fluctuating between 4 – 2.5 per cent since 2010.
3
Deutsche Bank, 2015, The Random Walk: Mapping the World’s Prices
4
Advice
Financial advice has been in the hot seat in Australia over the period of the white
paper review. We’ve seen a string of scandals involving financial advice and the federal
government’s Financial System Inquiry (FSI), which proposed the biggest overhaul in the
history of the Australian financial system. The FSI and a flurry of related regulatory reviews
revealed deep problems with some aspects of our financial system in Australia, and as a
result the advice sector had to lift its game and increase its educational and behavioural
standards. The results of our five-year review show that these events have coloured the
way Aussies view financial advice – and the industry has some way to go to fully retain
consumers’ trust.
RaboDirect Financial Health Barometer – A Five-Year Review
Please indicate the extent to which you agree with the following statements
“I have a long term financial plan”
100%
6%
10%
90%
80%
29%
33%
70%
36%
But this is not uniform across the generations: while more Gen Y say they have a long
term financial plan, the Baby Boomers are increasingly less likely to say the same.
In 2011, 35 per cent of Aussies were planning for their long-term future, with the figure
increasing six per cent in 2015 to 41 per cent. However, in recent years this trend has
slipped back: in 2014, 46 per cent of people said they had a long-term financial plan.
10%
31%
37%
60%
50%
32%
30%
40%
THE GOOD NEWS FROM THE SURVEY IS THAT SINCE 2011,
MORE PEOPLE ARE PLANNING FOR THEIR LONG-TERM
FINANCIAL FUTURE
9%
10%
31%
28%
30%
30%
20%
26%
23%
10%
7%
0%
2011
Disagree strongly
5%
5%
2012
Disagree
18%
20%
19%
2013
3
Neither agree nor disgree
10%
5%
2014
4
Agree
2015
Agree stongly
By generation, less Baby Boomers are planning for their long-term future. In 2014, 51 per
cent of Boomers reported that they had a long-term financial plan, but this proportion fell
to 37 per cent in 2015. For Gen X in 2014 the number of people with a financial plan was
43 per cent, falling to 38 per cent in 2015; while for Gen Y, 45 per cent of people said they
had a financial plan in 2014, which actually increased in 2015, to 48 per cent.
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RaboDirect Financial Health Barometer – A Five-Year Review
Please indicate the extent to which you agree with the following statements
Please indicate the extent to which you agree with the following statements
“I have a long term financial plan” By generations
“Financial planning is only important for those who have a lot of money”
By generations
100%
11%
90%
80%
70%
8%
12%
8%
10 %
9%
100%
34 %
28%
35%
36%
28%
43%
80%
60%
28%
40%
27%
33%
33%
30 %
27%
30%
10%
20%
21%
18%
5%
0%
2014
11%
5%
7%
2015
2014
2015
Disagree
Neither agree nor disgree
30%
4%
2015
Baby Boomers
Agree
29 %
Agree stongly
10%
10%
0%
2014
2015
Gen Y and Baby Boomers believe financial planning is only for
the wealthy.
Over time, more people have arrived at the view that financial planning is “only for the
wealthy.” In 2012, 17 per cent of respondents agreed financial advice was only for those
who have a lot of money, but by 2015, this figure had almost doubled, to 28 per cent.
From a generational perspective, in 2014 a total of 16 per cent of Baby Boomers agreed
financial advice was for those who have a lot of money – by 2015, this figure had reached
24 per cent. In 2014, for Gen X this same figure was 26 per cent and dropped to 25 per
cent last year. For Gen Y, the 2014 figure was 27 per cent – this proportion surged eight
percentage points in 2015, reaching 35 per cent.
2014
15%
8%
2015
Disagree
Neither agree nor disgree
13%
2014
Gen X
Gen Y
Disagree strongly
11%
8%
33%
30%
27%
23%
20%
17%
41%
37%
7%
39%
33%
34%
3%
13%
27%
26%
40%
11%
2014
19%
20%
50%
18%
18%
Gen X
Gen Y
Disagree strongly
18 %
21%
60%
6%
6%
11%
24 %
70%
50%
20%
7%
90%
2015
Baby Boomers
Agree
Agree stongly
Why has there been such a turnaround in sentiment among Gen Y and Baby Boomers?
It’s likely that the number of high-profile scandals in the sector in recent years, coupled
with the low-rate, low-return environment – which is having a dampening effect on
their wealth – have contributed to the lack of interest in financial advice amongst these
generations.
PART OF THE SOLUTION IS TO RAISE THE PROFILE AND
AWARENESS OF FINANCIAL PLANNERS, TO HELP IMPROVE
CONSUMER SENTIMENT TOWARDS FINANCIAL ADVICE
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RaboDirect Financial Health Barometer – A Five-Year Review
All generations are becoming less trusting of financial advice.
Over the life of the survey there has only been a slight shift in the number of people who
distrust financial advice. Yet when looking at yearly comparisons, there was a substantial
shift between 2014 and 2015. In 2014, 40 per cent of people said that they trusted
financial advice, but in 2015, this figure fell to 29 per cent.
People’s trust of financial services
40%
in 2014
falling to
in 2015
29%
Please indicate the extent to which you agree with the following statements
“I trust the advice from financial advisors and financial planners”
By generations
5%
100%
90%
100%
80%
90%
70%
80%
60%
70%
50%
60%
40%
50%
30%
40%
20%
30%
10%
20%
0%
10%
0%
5%
44 %
8%
8%
31%
41%
41%
9%
9%
2014
2014
2%
10% 2015
Gen Y
Disagree strongly
2%
6% 22%
4 % 29%
2%
22%
29%
48%
42%
48%
42%
2015
3%
3%
Disagree
12%
3%
20%
3%
20%
41%
12%
10%
2%Gen Y
4%
35%
31%
44 %
35%
6%
2014
42%
51%
42%
19%
14%
5% 14%
9%
2015
5%
2014
51%
Gen X
9%
2015
Gennor
X disgree
Neither agree
8%
19%
2014
2014
8%
41%
19%
19%
17%
2015
17%
Baby Boomers 2015
Agree Baby Boomers
Agree stongly
When comparing different generations, although more Gen Ys trust financial advice,
there has been a bigger downward trend year-on-year in this group compared to other
generations. In 2014, 49 per cent of Gen Y agreed that they trusted advice provided by
planners or advisers. In 2015, this figure had dropped ten percentage points to 39 per
cent. For Gen X in 2014 this figure was 41 per cent, dropping to 26 per cent in 2015, a
change of fifteen percentage points. For Baby Boomers in 2014, the number was 31 per
cent, falling to 23 per cent in 2015, a difference of eight percentage points.
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Consumer Confidence
Consumer confidence is fragile at present. The ABS 2015 December quarter figures show
the household savings ratio fell to 7.6% from 8.7% in the September 2015 quarter, to
levels not seen since before the global financial crisis. Dwelling approvals also fell by 7.5
per cent in January, driven by a 9.1 per cent fall in apartment approvals. On the other
hand, spending lifted over the tail end of 2015, providing a boost to December quarter
economic growth4.
This patchy outlook is also evident in consumers’ confidence about their finances.
Consumers are becoming less confident about their finances
RaboDirect Financial Health Barometer – A Five-Year Review
Please indicate the extent to which you agree with the following statements
“I am confident with my finances” By generations
100%
80%
70%
37%
41%
40%
52%
had confidence
falling to
in 2015
45%
37%
47%
33%
27%
36%
29%
34%
25%
20%
10%
16%
19%
6%
4%
0%
2015
Disagree strongly
14%
17%
5%
4%
2013
2015
14%
12%
Disagree
Neither agree nor disgree
6%
4%
2013
Gen X
Gen Y
in 2013
37%
43%
9%
12%
50%
2013
Consumer confidence in their finances
8%
60%
30%
In general, consumer confidence in their finances is dropping. In 2013, 52 per cent of
consumers said they agreed or strongly agreed they were confident with their finances,
but by 2015 this figure had fallen to 45 per cent.
7%
9%
9%
90%
2015
Baby Boomers
Agree
Agree stongly
It is likely that Baby Boomers are less confident because of their experience of the
financial crisis of 2007/2008, which had a disproportionate impact on their wealth. In
keeping with this, Generations Y and X aren’t as pessimistic because retirement is further
off, giving them longer to accumulate wealth.
had confidence
In 2013, half Gen Y and Gen X respondents agreed they were confident with their
finances, with 59 per cent of Baby Boomers feeling the same.
In 2015, those figures dropped to 46 per cent for Gen Y and Baby Boomers, and 45 per
cent for Gen X.
4
Australian Bureau of Statistics (ABS) January 2016, Retail Trade and Buildings Figures
(http://www.abs.gov.au/AUSSTATS/[email protected]/DetailsPage/5206.0Dec%202015?OpenDocument)
8
RaboDirect Financial Health Barometer – A Five-Year Review
Consumers are less informed about their finances.
The results show that consumers feel increasingly less informed about their finances. In
2011, 55 per cent of people agreed or strongly agreed that they were informed about
financial matters, whereas in 2014 this figure was 57 per cent, and by 2015 it was down to
49 per cent.
Surprisingly – given their age and arguably greater experience – Baby Boomers feel
they’re the least informed of all generations. In 2014, 61 per cent of Baby Boomers agreed
or strongly agreed that they were informed about their finances, but this number fell to
50 per cent last year. In 2014 this figure was 53 per cent for Gen X, decreasing to 45 per
cent last year. In 2014, 55 per cent of Gen Y respondents felt well-informed, a proportion
that dropped marginally to 52 per cent last year.
This trend can also be seen across the genders, with women feeling increasingly less
informed about financial matters compared to men over time. In 2014, 58 per cent of
men said they agreed or strongly agreed that they tried to stay informed about financial
matters, a number that dropped to 54 per cent last year. For women this figure was 55 per
cent in 2014, and 44 per cent in 2015.
Please indicate the extent to which you agree with the following statements
“I try to stay informed about money matters and finances”
By gender
100%
8%
11%
13%
90%
80%
Please indicate the extent to which you agree with the following statements
70%
60%
“I try to stay informed about money matters and finances”
By generations
45%
10%
90%
10%
80%
70%
8%
0%
42%
50%
33%
29 %
30%
Disagree strongly
13%
0%
2014
2%
10%
5%
2015
2014
Disagree
16%
12%
2014
2%
7%
2015
13%
11%
2014
Female
Disagree
32%
30%
Neither agree nor disgree
6%
2%
2015
Total
Agree
Agree stongly
30%
2%
6%
2015
14%
10%
2014
Gen X
Gen Y
Disagree strongly
16%
12%
5%
2015
33%
30%
28%
20%
10%
2%
10%
Male
34%
33%
10%
2014
50%
40%
31%
29%
20%
10%
60%
40%
46%
40%
11%
37%
42%
42%
45%
8%
11%
9%
11%
50%
30%
100%
38%
47%
43%
6%
Neither agree nor disgree
7%
1%
2015
Baby Boomers
Agree
Agree stongly
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RaboDirect Financial Health Barometer – A Five-Year Review
There appears to be a correlation between consumer confidence and the amount
consumers regularly save: as consumers’ level of savings have come down, so too have
consumers’ confidence. For instance, in 2014 respondents’ average savings in a typical
month was $908, a figure that fell to $705 in the 2015 survey. At the same time, in 2014
a total of 49 per cent of consumers agreed or strongly agreed that they were confident
with their finances, a number that dropped to 45 per cent in the current survey. The more
confident people are about their finances, the more likely they are to actively grow their
wealth.
SO THERE IS OPPORTUNITY FOR ALL AUSSIES TO BECOME
MORE INFORMED ABOUT THEIR FINANCES TO HELP BOOST
THEIR SAVINGS
10
Conclusion
RaboDirect Financial Health Barometer – A Five-Year Review
With research showing that Aussies are becoming increasingly disengaged towards their
finances, now is the time to act, to make a real difference not only to savings balances, but
also to mindsets. It’s about getting financially fit.
There are important steps consumers can take to change their financial position today:
• #FinancialGoals. A long-term financial plan is about visualising what finances will
look like at various intervals of time: five, ten and 25 years from now. This involves
deciding where you want to live, how much you’re prepared to live on each year,
and the types of debts and assets you would realistically expect to have. A thorough
review of your current financial position will help to provide a realistic direction on
what is achievable. Assess information such as how much you already have in the
retirement kitty, your existing salary, how much you can save each month and your
risk appetite. This will help you to develop a tailored financial plan, which should be
reviewed regularly to ensure you’re still on track to meeting your long-term goals.
• Pay down debt first. The 2015 Financial Health Barometer discovered that Gen X
has the highest level of average debt at $172, 015 above Gen Y ($114, 155) and Baby
Boomers ($100, 234), and over half (55%) of us have debts tied up on credit cards.
Paying off your debts fast, particularly credit card debit which usually carries a high
interest rate, before saving reaps more financial reward.
• Get interested in interest rates. The 2015 Financial Health Barometer research
found that 40 per cent of Australians are saving into a transactional account as the
main place for their savings – a decision that means that collectively, they’re missing
out on $2.3 billion* in potential interest. Making sure you’re getting the best rates
available across all of your accounts, and that you’re not paying excessive accountkeeping fees, will ensure that your savings plan is packing punch.
• Put a regular savings plan in place. Set up direct debit into a true high interest
savings account for a specific amount each payday. Putting any extra cash you have
into your savings account rather than leaving it idle in your everyday transaction
account will mean you’re earning the best possible interest rate on unused money.
NOW IS THE TIME TO ACT, TO MAKE A REAL DIFFERENCE NOT
ONLY TO SAVINGS BALANCES, BUT ALSO TO MINDSETS. IT’S
ABOUT GETTING FINANCIALLY FIT
• Make voluntary contributions to super. The amount you decide to contribute will
depend on how much disposable income you have. Do a budget and work out how
much you can afford to contribute each month. Due to the wonders of compound
interest, even a small amount, such as the price of an extra coffee a week, can
lead to thousands of dollars in return once you retire. A financial planner or tax
consultant can help you understand the tax benefits additional contributions can
have.
• Seek independent advice. We wouldn’t expect the Aussie cricket team to embark
on its next campaign without reviewing previous performance and asking the
coach for advice. Likewise, finding a trusted adviser to offer independent advice can
be a crucial element in setting yourself up for financial success. Consider reaching
out to an industry body such as the Financial Planning Association, where you can
find registered financial planners. Then, book an appointment and arm yourself
with details of your financial position, such as your recent tax return and bank
statements, and an idea of what you want your financial future to look like. Financial
advisers can help with a wide range of tasks, from putting effective savings plans in
place to more complex investment strategies.
A healthy financial future is about being passionate about your pennies, no matter what
the headlines are saying or how the market is tracking; it’s about being forever committed
to achieving your best financial position. While getting ahead financially can feel
daunting, you can remain engaged and enthusiastic about your financial goals because
the results clearly show the more engaged you are, the better your financial future.
Read more Financial Health Barometer results
and handy tips to get you financially fit
VISIT OUR BLOG
* Roy Morgan Single Source, 12 months to April 2015 (n=33,630)
Australians aged 14+ years who hold a transaction account
RaboDirect is a division of Rabobank Australia Limited ABN 50 001 621 129 AFSL no.234700.
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