New report reveals financial wellbeing is about more than the finances

Financial wellbeing isn’t just about people’s financial situations. It about having enough money to meet expenses, but also about having spare cash to make choices, feeling in control of your financial situation, and whether or not you worry about money, says a new report released today by the Centre for Social Impact (CSI) and the Social Policy Research Centre (SPRC) at UNSW Sydney for Financial Literacy Australia.

Exploring Financial Wellbeing in the Australian Context provides valuable insights for people working to promote financial wellbeing. It shows that according to the lived experience of people across Australia, there are three interrelated dimensions that make up financial wellbeing. They are:

• Meeting expenses and having some money left over.
• Being in control of finances.
• Feeling financially secure.

There is also an important time dimension to financial wellbeing. Financial wellbeing is determined not just by how people are faring in the three dimensions now, but also how they’re setting up for and feeling about the future.

The report provides the foundation for the future development of a framework to guide practitioners in refining, innovating, and collaborating on improving financial wellbeing outcomes for Australians. It starts the journey towards a shared understanding of what financial wellbeing looks like, how it can be improved, and how it can be measured.

The research shows what influences financial wellbeing, and highlights the connections between these influences. Professor Kristy Muir, CEO of CSI, and lead author said that a person can be stronger or weaker in a particular area, but the overall result is important.

“All three dimensions, when assessed together, give us a really clear understanding of an individual’s financial wellbeing. This is particularly important when we know that household debt levels are high, and one in five Australians cannot or do not know if they can raise $2,000 in an emergency,” said Professor Muir.

“We know that over two-thirds of Australians feel some level of financial stress and around one in eight experience high levels of financial vulnerability. A better understanding of financial wellbeing could help to better tailor appropriate products, services, and supports to improve outcomes for Australians, and the economy.”

The report also explores the potential influencers of financial wellbeing, the strongest of which were financial capability, personal health, financial inclusion, social capital, and income. Life events, the ability to respond to financial shocks, and household, community, and societal contexts also all play crucial roles.

Co-author Dr Myra Hamilton from the SPRC said it should be noted that wellbeing in this context is not fixed. “As we would expect, a person’s financial wellbeing is not just a feature of their circumstances in the present. It is also shaped by their past circumstances and their aspirations for the future."

Robert Drake, General Manager at Financial Literacy Australia said the findings were important in helping financial service organisations to further develop their offerings to help promote and improve the financial wellbeing of Australians. “The report gives us a unique insight into what constitutes financial wellbeing, and importantly shows us where we can work to help people.

Financial service organisations, for example, can ensure that financial products and services are appropriate, affordable, tailored and accessible; financial educators and counsellors can focus on the aspects of people’s lives that can be controlled; and governments can help regulate the financial services sector.”

The Financial Wellbeing Tree

The research team also developed the “Financial Wellbeing Tree” which clearly shows the factors and influencers that play a role in determining a person’s financial wellbeing. Importantly, it demonstrates that financial wellbeing is not just about an individual’s situation. It is also influenced by people’s household, community and social contexts. This is called taking an ecological systems approach to understanding financial wellbeing.