Video: Financial well-being research in New Zealand and Australia

Celestyna Galicki: Hello. Thanks for having me here. I am jetlagged. I flew in from New Zealand.

(Laughs)

So please don't judge me harshly today.

(Laughter)

So I will be talking about financial wellbeing research in New Zealand and in Australia. I work for the Commission for Financial Capability, which is an independent government agency that has the mandate to help New Zealanders get ahead financially. And we do it through a range of financial education programs in workplaces, in communities, and also online programs. And New Zealand and Australia were countries in the study that Elaine and Rebecca were talking about, then we also had our own survey, a financial capability barometer, which was a bit less scientific because we measured wellbeing just by asking people how do you feel about your financial situation. And the responses used metaphors, so “oh, I'm sinking badly, I'm just drowning in debt”, or “I'm swimming happily”. And this was a result of a qualitative study which found that these are the metaphors people use when they talk about their financial situation. So we have different ways of measuring financial wellbeing, but – and this, for me, is a great finding. There are similar results as to what influences financial wellbeing. And this is what I will be focusing on in this presentation. If you're interested in specific numbers from New Zealand, it's on the website of the ANZ study.

So this is… this is the slide that shows modelling done in the ANZ study showing which kind of factors influence financial wellbeing and how much. So we see that economic factors, they are important, but they're not the most important, as we have seen looking at examples of people in the same income bracket but behaving in different ways. So in the ANZ study, these economic factors add up to 15 percent of the influence, and in our study it's similar: income is around 11 percent. And this is very surprising because when you ask people what do you think influences financial wellbeing and how much, they will say, oh, like, 70 percent of it is income, but it's not. And this is very helpful to have these results because we keep explaining to policy makers, to other agencies, that financial capability is not just about income, it's about a lot of other things.

So financial behaviour, not borrowing for everyday expenses. Yes, and it's the same in our financial capability barometer. And we also asked people who they are borrowing from, and it seems that borrowing from friends and family is especially detrimental to financial wellbeing. I think perhaps this is because – it changes the structure of your support networks. Your social relationships are not the same once you start borrowing money. We also see the health gradient across the segments, similar to the ANZ study. And I think it's what we have seen in our qualitative research, that having health issues, especially long-term health conditions, can spill over to how well people feel financially. So financial wellbeing is not just about finances. Happiness or unhappiness from other areas of life can spill over into it and distort how people see their situation.

Psychological factors, so locus of control, our research confirms that too, and confidence in money management skills. In our survey, it also seems that talking about money makes a difference, and there is a cultural taboo in some groups against talking about money openly. And this is detrimental to people's financial wellbeing because it prevents learning and it prevents modelling of behaviour. And some of the differences in locus of control, we have found, seem to be cultural because different ethnic groups score differently on this part. And there are some cultures in which apparently it's not OK to say, you know, I've got control over my life, because that will be totally arrogant and you're supposed to think that everything is in the hands of fate or God. But some of these people are doing quite well financially, so I think these cultural differences are something that needs to be researched in more detail in the future.

So in the ANZ studies, again, income matters at the bottom, and at the top. If you have very low income, your financial wellbeing is likely to be low; high income, high wellbeing. But in the middle, there's little difference. There's a huge variety of financial wellbeing across the same income brackets when you look at this middle range of income. And this is similar in the financial capability barometer, so the – the upper graph shows different financial wellbeing categories, and that's boxplot of personal income, so you see there is a gradient. But the lower slide shows saving frequency, so how often people save, in the same range of personal income, 50 to 100K per annum. And here you see the slope is much steeper, so to say, and this behaviour, saving behaviour, really makes a difference, even if it's a similar range of incomes.

So we know that behaviour is important, and – and the next question is so what influences behaviour. How can we change people's behaviour? So we've got attitudes – optimism, a locus of control; also environment – who people compare themselves with. We find that a lot of spending – and that's from our qualitative research – is driven by what sort of reference group people have. Who do they compare themselves to? Who sets the norms for spending in their immediate environment? And also, there are cultural norms. For example, saving is perceived as selfish in some communities. And New Zealand has got the Indigenous population, the Maori people, 14 percent of the population. So it is a large population, and they – their culture highly values generosity, highly values gifting, and it is absolutely wonderful, but it makes some people go into debt to raise their social standing by showing their generosity to others.

Social networks, so the resources people have to draw on, that's something that's under-researched. We have – we've done some qualitative research on it, but I think it's worth including in some future surveys because it can make a huge difference, the access to free services and free knowledge and other resources that people have. We – we've done a small survey on how much parents help their adult children in making purchases such as cars, homes, university education, and it seems it's a lot, and some young adults have access to this and others don't, and this is something that often doesn't come up when you just ask about their income and not the broader family situation.

So– and finally, we have also policy, so we're trying to make saving easier. In – in New Zealand this has been mainly done by the KiwiSaver scheme, which you can look up on line if you are interested. But overall, there are multiple and complex influences on people's financial behaviour, and this is still a puzzle for us. We're just beginning to untangle bits of this puzzle. And that's why I'm so excited to be here and to hear what other researchers have found. And so we still have these questions, so how – how do we change people's behaviour? How do we use education? How do we use policy? How do we use nudges and what we know from behavioural economics to improve people's financial wellbeing? Thank you.

(Applause)