This is the ability of a consumer to be in control of all aspects of their financial lives. It is an essential concept with benefits for everyone. When consumers are consumers are financially capable, they can function efficiently in society and fulfil their roles as citizens towards the development and growth of the Australian economy. This is why governmental agencies collaborate with different sectors such as the community, business, research, and education sectors to ensure that the culture of strong financial capabilities is imbibed in individuals, households and communities. Making a financial decision might look simple and straightforward at first glance. But for every decision made, there are many unseen factors that are working underneath that led to that decision. No decision is made in a vacuum. Every financial decision has consequences or effects, and life is so complex that we have to adapt at intervals, and this may necessarily force us to change our approach to decision making.
This is why the National Financial Capability Strategy is in place to assist and guide Australian towards making decisions that reflect their long term needs. In order to help people in making the right decision, there is a need first to understand what influences their decision making. By understanding the context and circumstances in which is made, it becomes easier to assist people and provide the support necessary to help them make the right ones.
The Importance of Financial Capability
We are all connected to the financial system in one way or another. Most times, we don’t even notice this because it has become part of our daily routine. It is only when we engage with the system directly during an important financial +decision-making process that we pay serious attention. But these are not the only periods that matter.
Our engagement with the financial system begins mostly from our bank accounts. This is something that most Australians have. Regardless of net worth, we all interact with financial services and products. Thus, it is important to understand how these products and services work so we can utilize them to our advantage.
By having the right information and possessing understanding, we can make plans for our financial future in a more strategic manner. The best time to do this is when things are rosy, and our financial lives are balanced. However, keeping our financial lives in good shape is only possible with financial capability. While 60% of Australians have been able to stay on track in their finances, there are still significant concerns such as the fact that 1 in 3 people are struggling to with money problems and managing their finances.
How to Build Financial Capability
Our situations may be unique with everyone having different stories and experiences regarding finances. However, the goal for everyone is to improve their financial wellbeing. The National Financial Capability strategy focuses on achieving these goals through three means:
- Education of Australian to improve their financial capability
- Informing Australians about the tools, opportunities, and resources needed to make the best financial decisions
- Supporting Australian by helping them understand their circumstances and avoid wrong decisions.