Financial Literacy Problems in Australia - Research Proposal Example

Financial Literacy Problems in Australia Student’s name Course code+name Professor’s name University name City, State Date of submission Table of Contents 1.1 Introduction The Australian financial service industry has exponentially grown in the last two decades. The various government initiatives and policies implemented during this period have provided many financial services and products to the Australian population. The resultant effect is that the daily requirements of obtaining mortgage rights, savings and future investment strategies require high levels of financial skills. Also, the introduction of the compulsory superannuation has added more services and products that emphasize on retirement benefits products (Gallery, Newton & Palm 2011). The changes in the Australian financial market have called for the need of personal financial knowledge that can empower individuals to comfortably and successfully navigate through the current financial service industry. Financial literacy, in today's world, is considered an important skill for consumers in their pursuit of making proper financial decisions. Financial literacy, according to some literature, is termed as the ability for an individual to make proper judgment and undertake effective decision with regards to the expenditure and management of money (Bateman et al 2012). While navigating through the current financial landscape in Australia, at least basic financial skills, apart from the complex financial knowledge are required. Financial literacy has consequences on the welfare of individuals in their management of their funds and stability in their finances. With the increase in financial products, individuals have been exposed to more choices and opportunities. However, they are facing the risk of making poor financial decisions (Huston 2010). The proposed research seeks to examine the implications of the financial services to the Australian population and try to come up with measures to ensure that the services benefit both the literate and the illiterate citizens. 2.0 Literature Review 2.1 Education and Financial Literacy In this particular research proposal, various literature concerning the topic have been reviewed in order to offer the basis for the conduction of the study. Various studies undertaken in the past have already indicated that financial services have increased and are complex calling the need for a financially literate community (Hung, Parker & Yoong, 2009). The low literate financial levels pose a challenge to making mortgage decisions and have led to the unstable high debts levels. Some scholars argue that personal finance should be included in basic education for all (Jappelli, 2010). The idea is almost being adopted by the most developed countries which aim to enforce financial education to be part of the Kindergarten. Although various researches have resulted to mixed responses about the effectiveness of financial learning, most researches indicate that financial education brings about positive financial behavior (Jappelli & Padula 2013). A research based on the youth financial behavior provides evidence that formalizing financial learning can improve financial knowledge resulting to more positive financial behavior. Formal financial literacy programs for the youths, such as the high school students, have significant positive impacts on the spending habits of the high school students (Lusardi & Mitchell 2011). Financial educations during the high school education resulted in higher saving rates especially at the time the generation will enter the economic world. The studies generally provided evidence that financial education can improve the financial status of individuals and their families. Not all research, however, are positive on the question of whether financial education contributes to proper financial decision making. Some studies argue that the time spent on financial education would matter in its effectiveness. Short-lived financial education may be of benefit in a short while whereby an individual can increase his/her savings, but the positive results can diminish over time (Lusardi & Mitchelli 2009). Other studies indicated that it is not easy to convert the deeply sank psychological characters by application of conventional knowledge -based education. Others scholars have also indicated that financial behavioral changes depend on individuals determined goals and not defined by the participant (Mandell & Klein 2009). Some financial concepts were also found to be complex and cannot be interpreted by teenagers rendering the education unfit for the young people, hence, ineffective at a certain level (Mandell 2008). 2.2 Financial Literacy in the Australian Population A review of previous researches conducted in the Australian population has indicated that most Australians are reasonably skilled in managing their day to day finances but are unable to manage more complex financial issues. Most Australians would say that their higher returns pose higher risks, but others do not agree that higher returns would pose higher risks (Mandell & Klein 2009). While most consumers only understand their bank and credit card charges, very few understand the charges and the fees for managed investments and the superannuation system (Remund 2010). Further research findings have revealed the poor state of the Australian financial system with regards to the knowledge that is available to the people about the compulsory government superannuation system (Williams 2009). A research conducted on the highly educated individuals, the highly wealthy individuals, managerial group of participants and professionals, resulted only in 22% of the respondents who scored a more than 50% rate when asked about the compulsory government superannuation system (Worthington 2010). Increased debts levels in the Australian population together with bankruptcies and poop preparations for retirement are said to have led consumers to losing $900 million in three years via misleading financial prospectuses. These indicators reveal that many Australians are susceptible to misleading information leading them to fail in managing their finances responsibly. The research calls for the need for individuals to seek financial knowledge and increase their skills so as to ensure that they fully benefit from their finances (Gallery, Newton & Palm 2011). 2.3 Financial Literacy in Australian Schools Some previous studies were conducted in to identify the current situation of financial literacy in the Australian schools. The studies involved curriculum maps that revealed opportunities available in the schools for teaching financial literacy skills. The research findings indicated that adequate level of financial illiteracy will only be achieved by combined efforts of various organizations and sectors. Other reports indicate that financial literacy was already being taught in schools curriculum to a given extent (Mandell & Klein 2009). When the school curriculum was reviewed, it was found to have included financial education in non-compulsory subjects; hence, not all the students were benefiting from the education (Jappelli 2010). Some students took subjects that did not include financial literacy topics. In addition, students interacted with topics such as financial banking for instance; savings and interest earnings in their school environment as the services were available. There have been no measures in financial matters within the Australian curricula to test the financial literacy levels in the Australian schools (Hung, Parker & Yoong 2009). The research proposed that an evaluation was required to assess the successes and failures of any initiatives that are undertaken (Gallery, Newton & Palm 2011). Since then, nothing indicates that publics announcements relating to the moves have been made. 3.0 Research Problem The objective of the research is to investigate the implications of emerged financial services to the Australian population and design measures to ensure that the services benefit both the literate and the illiterate citizens. Specifically, the research aims to: Identify the implication of government initiatives and policies concerning financial dealings on the Australian population. The financial literacy levels of the Australians as compared to the financial policies. Explain why financial knowledge is important in making positive financial decisions and improving financial expenditures of individuals, families and the general economy. From the above literature review, it can be evident that financial literacy is playing some role in the financial management of individuals in the Australian economy. These indications necessitate the need for further research into the issue so as to come up with more findings on the topic. The changes that have taken place in the financial system have affected all individuals irrespective of their age and ad academic levels. All citizens make use of the financial policies irrespective of their, ages, careers and professionals, hence, the call for knowledge in handling financial issues to avoid losing funds through lack financial knowledge (Mandell 2008). The objective of the research is therefore to provide a directive on how the people can acquire the financial knowledge and use it to manage their finances at individual levels. 4.0 Data Sources The proposed research uses secondary data by a review of past literature on the topic which will give a directive in formulating the way to gather primary data. The secondary data involves reviewing academic journal and other online sources that have conducted research on the same topic in the past. The secondary data is advantageous because of its less costly nature, availability and contains early researches dating more than two decades ago. The possibility of finding old materials tackling the same issue can give a picture on how financial decisions were being made in Australia before the introduction of the any financial policies. As seen from the literature review, the secondary sources are enlightening on what can be emphasized in the research and what may seem not to add more weight into the topic. Primary data for the proposed research shall be gathered though surveys. A survey on the Australian population about their financial undertakings will help to gather a lot of information about the subject matter. Surveys can be taken though various means such as the online questionnaires where individuals will be asked to give their experience of the financial policies through a set of questions. The online questionnaire shall be anonymous. This method is effective in gathering sufficient information and saves time (Remund 2010). The written questionnaire shall also be used in some areas where respondents will be required to give their views in a hard copy form. Another primary method that shall be effective in the proposed research shall include one on one interview where respondents give their views and also ask questions. This method, though time-consuming, can be very effective for people who cannot understand written financial concepts and give their feedbacks (Jappelli 2010). The concepts may require elaborations for them to understand better and give the desired feedback. 5.0 Conclusion Primary data and secondary data all together can be used to achieve the objective of the research that can derive its findings from the data. The issues surrounding the financial management in Australia shall be brought out clearly from the primary data over which they can be combined with the secondary data from the literature review to give various proposals to solve the problem. The findings from the research can be used to resolve the problem of financial literacy in the Australian economy. Bibliography Bateman, H., Eckert, C., Geweke, J., Louviere, J., Thorp, S., & Satchell, S 2012, Financial Competence and Expectations Formation: Evidence from Australia*. Economic Record, Vol. 88, no. 280, pp. 39-63. Gallery, N., Newton, C., & Palm, C 2011, Framework for assessing financial literacy and superannuation investment choice decisions. Australasian Accounting, Business and Finance Journal, Vol. 5, no. 2, pp.3-22 Huston, SJ 2010, Measuring financial literacy. Journal of Consumer Affairs, vol. 44, no. 2, pp. 296-316 Hung, A., Parker, AM., & Yoong, J 2009, Defining and measuring financial literacy. Jappelli, T 2010, Economic Literacy: An International Comparison*. The Economic Journal, 120(548), F429-F451. Jappelli, T., & Padula, M 2013, Investment in financial literacy and saving decisions. Journal of Banking & Finance, vol. 37 no. 8, pp. 2779-2792. 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Remund, DL 2010, Financial literacy explicated: The case for a clearer definition in an increasingly complex economy. Journal of Consumer Affairs, 44(2), 276-295. Williams, T 2009, Empowerment of whom and for what? Financial literacy education and the new regulation of consumer financial services. Law & Policy, vol. 29, no. 2, pp. 226-256. Worthington, A 2010, The distribution of financial literacy in Australia (No. 185). School of Economics and Finance, Queensland University of Technology. Read More