25 May Why financial literacy is a good skill to have

Canstar is on a mission to make learning about finances more accessible and help Aussies manage their money better by launching Canstar’s new TestMyMoneyIQ quiz.

Many people in Australia lack knowledge about basic finance, which is called financial literacy. It’s important because it affects how well we manage our money. A survey by Canstar, a financial comparison site, found that even though 60% of Australians believe they are financially literate, 46% failed a quiz designed to test their knowledge.

Financial literacy is not just about knowing maths; it’s about understanding how to make good financial decisions in everyday life.

To help people learn more about finances, Canstar created this quiz called TestMyMoneyIQ. It has 21 questions that cover different financial topics. Taking this quiz can help everyone see how much they know and where they might need to learn more.

Canstar’s Editor-at-Large and money expert Effie Zahos says, “Most household budgets fall apart as many people simply don’t know how to apply the fundamentals of financial literacy to their everyday lives. This quiz delves into practical money situations that we all have to deal with.”

The survey also found that men performed better than women and younger people scored lower than older generations. However, the good news is that 72% of Australians want to improve their financial literacy. Some want to learn by themselves, others need guidance, and some don’t know where to start.

Improving financial literacy can benefit not just individuals but also their families, friends, and the wider community. Understanding basic financial concepts and applying them to everyday situations, like managing household budgets, can help save money and make better financial decisions.

So, it’s important to recognize that financial literacy is a valuable skill to have, and there are resources available, like the TestMyMoneyIQ quiz, that can help us improve our knowledge about managing money.

Key findings from the TestMyMoneyIQ quiz

• 54% of Australians have so far passed Canstar’s TestMyMoneyIQ quiz, however, the average score achieved was only 11 out of 21.

• Surviving the cost of living crisis may see some people turn to credit cards, however, the vast majority (81%) of Australians don’t understand how interest-free periods work.

• Anyone looking for ways to cut back is likely reviewing their energy bill. While energy companies promote big discounts off the reference or default price, thankfully, 74% of Australians know this doesn’t always mean it’s the cheapest option in the market.

• Rising interest rates pushing up home loan repayments should have mortgage holders on notice to make the most of their repayments, yet 56% of Aussies weren’t able to identify the most cost-effective strategy for making regular repayments.

• Earning more money is one way to combat rising living costs. Savers with money in the bank who have likely seen their interest returns rise in recent months could be rejoicing, however, 43% of Aussies did not grasp the impact that inflation could have on their purchasing power after factoring in interest earnings.