FinCap Survey: Are Kiwis Ready For Retirement And Emergencies?

Contents:

• What is financial capability?
• Kiwis meet financial commitments
• A moderate level of financial security 
• Unprepared for short-term unforeseen expenses or income reductions 
• Not prepared for retirement 
• Kiwis are eager to save more than what they already have 
• Kiwis do not borrow money for daily living needs 
• Kiwis are mindful about pricing before making a purchase 
• Kiwis need to do more study on financial products 
• Kiwis have control over how they use credit 
• Kiwis know how to create a budget 

According to the Annual Financial Capability Survey in 2021 which polled over 3,000 Kiwis, New Zealand scored 61 out of 100 in terms of overall financial wellbeing.

It also revealed that two-thirds of Kiwis make poor financial product decisions, given that more than 85% are unable to compare the terms and conditions of a credit or financial product, while 41% completely disregard its terms and conditions. 

On the other hand, Kiwis were found to be good with budgeting and income management through the help of budgeting tools and other budget-focused services that are being efficiently utilised for financial planning. 

A person’s overall financial wellbeing is influenced by factors other than one's income. This involves changing behaviours and attitudes, as well as becoming aware of financial solutions intended to pave the way for a person's financial journey.

What is financial capability?

Financial capability refers to the ability of a person to manage his money effectively. Budgeting, understanding financial products, long-term money management, and confidence are just some of the main parts of this combination of behaviours and knowledge. A person may excel in all of these areas, or they may succeed in some while falling short in others.

Here's a summary of the FinCap 2021 survey on the subcomponents of financial well-being to better understand how financial capability can contribute to overall financial well-being.

These findings can help you figure out the areas you need to work on, so you have a better and more financially secure future.

Note: See the complete Financial Capability Survey here. 

Kiwis meet financial commitments

As per the report, many Kiwis can meet their existing commitments, but the challenge is more widespread among Maori and Pacific peoples with children under the age of 18, who also have a chronic health condition.

50% had no trouble paying their bills. 60% on the other hand have very rarely/never had payment problems at the final reminder due to a lack of funds, and only 7% answered very often/always when asked if they don't have money for food or expenses. 

Kiwis have a moderate level of financial security

The survey records a 59 out of 100 in terms of Kiwi’s financial comfortability. 24% often have money left over at the end of the pay period, but the same percentage never or seldom have money left over.

75% consider their financial situation good or very good, and 65% are confident about their financial situation in the near future, but only 51% say that their finances allow them to enjoy life.

Read: How Does Investing Work In New Zealand?

Kiwis are unprepared for short-term unforeseen expenses or income reductions

In the event of an unforeseen expense, 84% have money easily available equivalent to one month's salary, but just 38% have savings equivalent to six months or more than 12 months income, and only 42% think they can cover a drop in income by a third without having to borrow.

Kiwis are not prepared for retirement

NZ scored 43 out of 100 for preparedness for retirement. However, it should be noted that the metric was designed based on countries with less generous basic state pensions than New Zealand Super and where private savings are required.

40% have adequate retirement income without working, 27% need to rely entirely on New Zealand Super for retirement income, and 40% think they are prepared for retirement.

Kiwis are eager to save more than what they already have

Active saving is among the top priorities in the NZ population. 

47% say they frequently save money to meet unexpected needs, 71% strive to prepare for the future, 73% save money on a regular basis, and 61% make sure they always have money saved.

Read: How To Invest In Index Funds In NZ

Kiwis do not borrow money for daily living needs

The act of not borrowing for daily needs is the second-most important contributor to overall financial well-being, after active saving.

While many Kiwis are doing well, 17%  use credit for food and others often or very often/always, 9% always or often borrow money to pay off debts, and 15% are overdrawn every month or most months.

It is also important to mention that those with chronic health conditions who have children under the age of 18 are at an exceptionally high risk of borrowing for daily needs.

Kiwis are mindful about pricing before making a purchase

Kiwis are not impulsive buyers. 78% carefully consider need before buying, 60% do not run short of money through overspending, only 15% struggle with impulsively buying things they cannot afford, and and less than half say they are more of a saver than a spender.

Read: How Much Is The Average Weekly Grocery Bill In New Zealand?

Kiwis need to do more study on financial products

33% do not perform their own research on the best financial product, and more than half do not conduct information searches before purchasing products. 

Kiwis have control over how they use credit

70% pay their credit cards in full every month, 61% do not obtain unsecured loans, and 83% has restrained credit use.

Kiwis know how to create a budget

76% understand how to balance spending and income, 58% understand how to choose credit products, and 78% feel they can manage their money properly.

Read: How 'Salary Sacrifice' In NZ Can Set You Up For A Better Future

KiwiSaver can be a good head start for retirement

Start with your safest bets in investing. Compare KiwiSaver Schemes here at glimp, and find the one that best suits you. This should help get the ball rolling in your journey towards investment, and ultimately, financial capability.