Everybody, regardless of circumstances, needs some financial literacy. The Australian government has a financial capability strategy to help build financial literacy. Some areas of concern include:
- ‘Close to 1 in 5 struggle with credit card debt
- 3 in 5 don’t understand the investing concept of diversification
- 2 in 3 don’t know the exact value of their super.’
The Royal Commission into misconduct in the banking, superannuation and financial services industry made the need for financial know-how clear.
Plus some economic literacy would also help, given we are so often told ‘the economy’ is so important, rather than our society. Tapping the wisdom of people who can demystify economics would be a good place to start. People like Ross Gittins and Richard Denniss, author of Econobabble. And the research papers of The Australia Institute. So often, the language of economics is used to confuse and deceive. As Denniss points out in Econobabble, “They [Australian politicians] use words like productivity when they mean profit. They say things like ‘The economy is overheated’ when they mean ‘The wages of low-paid workers are growing faster than I think they should’. Words matter.”
Whenever governments cut taxes it’s useful to know what this means and what your options are before you go on a spending spree. Reducing debt stress (such as credit cards, mortgage, or outstanding bills) or saving the money (for emergencies, in superannuation, for a home deposit) may be better choices than a new smart TV.
Career practitioners need financial literacy as citizens, business operators, and as service providers. An examination of the roles of career practitioners, the career development standards, competencies, and the relevance of financial literacy to careers, all point to the need for career practitioners to have some financial literacy and referral links with specialist advisors. Some also need some economic and business literacy, depending on the context in which they work.
What is financial literacy?
Financial literacy is a combination of financial knowledge, skills, attitudes and behaviours necessary to make sound financial decisions regarding the use and management of money, based on personal circumstances and needs. Or, put more simply by ASIC, ‘financial literacy encompasses both knowing about money matters and being equipped to utilise that knowledge by applying it across a range of contexts. … Generally, however, it will involve an understanding of:
- a person’s own values and priorities;
- budgeting, savings and how to manage money;
- the importance of insurance and protecting against risk;
- investment basics;
- retirement planning;
- the benefits of shopping around and how to compare products;
- where to go for advice and additional information, guidance and support;
- how to recognise a potential conflict of interest; and
- how to recognise and avoid scams.’
The way in which a person behaves will have a significant impact on their financial wellbeing, such as actively saving, and shopping around for financial products.
Attitudes and preferences are considered to be an important element of financial literacy. If people have negative attitudes towards saving for their future, for example, it is argued that they will be less inclined to undertake such behaviour.
Financial literacy is a relative concept, depending on the complexity of the financial system and products in a society and an individual’s needs and circumstances. With a constantly changing financial and social environment, people need financial literacy to deal with increased expectations to manage their financial affairs, less stability in working patterns, increasing access to credit, and technology increasing privacy and security risks.
We all hold beliefs about money, drawn from personal experience, other people’s comments, media messages, cultural and religious influences, to name a few. We may be anxious about money, lack confidence about our ability to make financial decisions, regard money positively or negatively, hold back from developing money management skills because ‘it’s too hard’ or ‘I’m no good at maths’ or ‘I’ll leave it to someone else to take care of’.
Career practitioner roles that need financial literacy
The definition of a Career Development Practitioner is broad, to cater for the range of contexts they work in and services they provide.
The Professional Standards for Australian Career Development Practitioners provide this definition:
“Career Development Practitioners provide a wide variety of services to diverse client groups in order to foster their career development. Career Development Practitioners may deliver services in settings such as, but not limited to, schools, higher education (e.g., TAFE and universities), business organisations, government agencies and private practice in a range of formats including one-to-one, small groups, via the web, large classes and self-help materials. Such services may include, but are not limited to, career counselling, career advice, career education, job placement, employment services, recruitment, career coaching, training, mentoring and coordinating work experience or internships programs. Career Development Practitioners may work at either a Professional or Associate level.”
Practitioners may provide a service that facilitates career decision making, provide timely and authoritative advice and information, offer a process that assists people through self-awareness and understanding in order to develop a career direction, and assist people to make educational, training and occupational choices to manage their careers.
While the Professional Standards do not specifically mention financial literacy, there are several relevant references. What these references point to is that some practitioners do need some financial literacy. In particular, they are practitioners who:
- Operate their own business
- Manage projects
- Manage budgets
- Have clients who may experience financial difficulties, such as those facing redundancy, retirement, career change; people starting careers with large education debts; clients with limited job opportunities.
- Teach career management skills.
When working with clients, career practitioners would benefit from recognising attitudes and behaviour impacting careers, education and work, and the need for financial knowledge and skills to better manage careers.
Career practitioners who operate a business need relevant knowledge, skills, attitudes and behaviours, as do those managing budgets. For private practitioners, how you relate to money can impact how comfortable you are with setting realistic fees.
Professional Standards relevant to financial literacy
The Professional Standards for Australian Career Development Practitioners lists a range of principles and competencies that are relevant to financial literacy.
The Code of Ethics includes the standard: Ethical principles for career development Practitioner-Client Relationships. These principles include:
- Accept the rights of the client to make independent choices and to take responsibility for those choices and their consequences.
- Ensure that the services provided are culturally appropriate and relevant to the clients’ needs, and valid and reliable concerning the information they provide.
- Apply, and inform clients about, ethical issues (such as privacy, information-sharing practices) associated with media technologies, including social networking.
- Make appropriate referral when their own competency does not meet the client’s need or when their professional assistance cannot be provided or continued.
These principles can embrace financial matters and would certainly include referring to qualified financial professionals, including financial advisers, accountants, financial support services.
The Core Competency Career Development Theory includes understanding models of career decision-making and their application, and applying models of career decision-making to practice. Systems theory means taking account of a range of career influences, which could include financial factors. Theories concerning change means understanding the economic issues that impact the labour market and having financial literacy to deal with the unexpected.
The Core Competency Labour Market Information includes keeping current and comprehending local, regional, national and international labour market trends and information, and assisting clients to interpret labour market information in the context of their career decision-making and aspirations, skills, knowledge and needs. It also includes assisting clients in creating their own opportunities, including entrepreneurial opportunities. Understanding the economy, business, and having some financial literacy underpin providing these services
The Core Competency Diversity and Inclusion includes understanding the influence and impact of the client’s cultural, geographic, social and economic environment or context in decision-making. Research referred to in this article points to client groups who potentially need insights into the economic and financial environment.
The Core Competency Professional Practice Application includes applying sound business practices. As Briefing Paper 2 points out, “This means business practices that relate to the work of Career Development Practitioners rather than essential, core business knowledge.” Financial literacy is essential to meet this competency.
The Specialised Competency Career Development Program Delivery includes Preparing and presenting program proposals that consider context, budget, objectives and outcomes.
The Specialised Competency Project Management includes understanding and applying the processes of, and tools for, preparing project plans, managing projects, including effective budgeting, implementation, monitoring and evaluation. It’s not possible to manage a budget or projects without some financial literacy.
Relevant Career Management competencies
The Australian Blueprint for Career Development is a framework for designing, implementing and evaluating career development programs for young people and adults. It sets out eleven core career management competencies, that is, the skills, attitudes and knowledge, that people need to make sound choices and to manage their careers. Some of these are relevant to financial literacy:
- Knowing how to manage stress
- Being aware of how changes related to work can impact on our lives and may require commensurate life changes
- Understanding the relationship between educational levels and the learning or work options that are open to us.
- Knowing how to interpret and use labour market information
- Understanding how society’s needs and functions affect the supply of goods and services
- Understanding how economic and social trends affect our work and learning opportunities
- Understanding the nature of the global economy and its impact on individuals and society
- Knowing how to locate, interpret and use labour market information
- Being aware of what might interfere with attaining our goals and developing strategies to overcome these.
Financial and economic literacy are essential to demonstrating these behaviours.
How does financial literacy impact careers?
Concerns identified by government and NGOs point to both the need for greater financial literacy, to areas that impact careers, and to groups particularly affected by low levels of financial literacy.
A 2011 ASIC report on financial literacy provides a useful summary of the value of financial literacy and its benefits. The report says:
‘Financial literacy is a skill for life, with significant benefits for everyone no matter what their age or income. It affects the opportunities we can pursue, our sense of security and our overall emotional—and often physical—health. In the United Kingdom, for instance, it has been estimated that moving a person with a relatively low level of financial literacy to an average level of literacy improves their psychological wellbeing by about 6% (compared to an 8% deterioration in wellbeing associated with being divorced or a 10% deterioration from being unemployed).’
‘Financial literacy also contributes to the economic health of society. More capable consumers and investors offer the prospect of improved household savings performance, reduced dependence on government allowances and lower levels of problem debt.’
‘Good financial literacy skills help individuals and families make the most of opportunities, meet their goals and secure their financial wellbeing. They are essential for social inclusion.’
‘More broadly, improved financial literacy can increase economic participation, drive competition and market efficiency in the financial services sector, and potentially reduce regulatory intervention.’
The ASIC report on financial literacy drew on surveys that found that overall the lowest levels of financial literacy are associated with:
- those aged 18 to 24 years and people 70 years and over;
- females, particularly aged 70 years and over;
- people with lower levels of education (Year 10 or less);
- people not working (for a range of reasons) or in unskilled work;
- people with lower incomes (household incomes under $25,000 p.a.);
- people who speak a language other than English at home; and
- people of Aboriginal or Torres Strait Islander descent.
The report noted that ‘the survey also showed that members of each of these groups are also included among those with the highest levels of financial literacy.’ Overall, the report found that ‘people seem to be more knowledgeable and confident about simple and familiar finance topics such as budgeting, credit, savings and debt; and less knowledgeable and confident about more complex and unfamiliar topics such as investing, superannuation and saving for retirement.’
Also noted is that: ‘It is also clear that people don’t always know what they don’t know. Studies show a significant mismatch between what people say they know and what they do know.’
Such issues may impact clients seeking help with career choices and transitions.
Financial literacy is relevant to teaching courses in career management skills. Teaching kids about money is important. As the government’s SmartMoney website points out, ‘if kids develop good financial skills from an early age they’ll be ready for the financial challenges of adulthood… Showing children the basics such as how to budget, spend and save will establish good money habits for life.’
Canadian research into financial independence and well-being for the next generation suggests there is a need to shift how finances are discussed and found support for financial literacy education. At the roundtables participants noted the importance, and the growing inclusion, of financial literacy education through post-secondary programs. There was also widespread agreement that young people should start learning about managing their finances at school, because those with a higher level of education are more likely to plan for their retirement
While most financial literacy programs focus on the management and allocation of financial resources, some participants noted that young people want financial education programs to pay more attention to helping them earn money, instead of assuming they already have it.
Financial issues are rated amongst Australians’ top causes of stress. As reported by the ABC, many people across all industries, income levels and job roles are feeling financially stressed. Such people are likely to be less satisfied with their lives, less engaged at work, and ultimately underperform.
Wesley Mission research found a growing number of people living with financial hardship. The charity also found that 38 per cent of households were spending more than they earn. Financial stress takes its toll. There are links with mental and physical health issues, family breakdown and substance abuse, and it can lead to social disengagement and isolation.
Career practitioners working with sections of the community may also need some financial literacy. Take women as an example.
The Women’s Economic Security Statement focuses on the barriers that might limit women in building their financial security and on practical measures to effect positive change. These include increasing financial literacy and helping with getting a job, returning to work, establishing a business, and improving economic recovery following life changing events, such as separation or domestic violence.
The website points out some specifics about women’s economic independence, including that:
- women are more likely than men to face financial hardship following separation and divorce.
- women who are lone parents are most likely to report financial stress
- women affected by domestic and family violence may be especially vulnerable to financial stress.
- many women, especially young women, find the idea of self-employment highly appealing, but lack the confidence, know-how or financial backing to pursue it.
The Women’s Economic Security Statement makes clear that financial literacy is not an isolated, stand-alone factor. When it comes to a person’s overall wellbeing, a range of factors are at work, feeding off each other.
A 2018 study of higher education accommodation and financial stress found that around half (53%) of students reported a moderate to high level of financial stress in relation to being able to afford study and living costs. The researchers found that high levels of financial stress were significantly associated with receiving government benefits, having a disability, and being on a low income. They also found that more than half of students (55%) reported that financial stress impacted at least one area of study.
The report states that: ‘There is a growing body of evidence on the link between undergraduate student poverty and adverse student outcomes, and this study contributes to this evidence base, which, taken together shows that a significant number of Australian domestic and international undergraduate students experience unacceptable levels of poverty.’ Part of the recommendations concerns providing better financial supports. While financial literacy is not specifically mentioned, consideration could be given to including this in support services to help with avoiding traps and scams, such as unscrupulous employment practices.
Having the knowledge necessary to make financially responsible decisions is not about understanding complex balance sheets or having expertise in wealth management. It’s about knowing how credit cards work, particularly how the high interest rates affect accumulation of debt if the card balance is not paid, figuring out how to stay out of serious debt, understanding how purchasing decisions impact your budget, figuring out how to pay for education.
This knowledge directly and indirectly impacts career decisions and choices:
- When selecting a career, how do pay scales, industry growth, unemployment rates affect that choice?
- What impact will career choices have on income, financial stability, goals and dreams.
- Will an applicant that understands how businesses and companies work and how they contribute to their success be more attractive?
- A person with fewer financial worries will have less stress and possibly better relationships.
- A financially literate person has a better chance of being prepared for retirement.
- Interpreting labour market information accurately depends on some understanding of economic factors at play, and what statistics actually mean.
Building financial resilience
In 2016 the Centre for Social Impact wrote a report on financial resilience, the ability to access and draw on personal skills and external resources and supports in times of financial adversity.
The financial resilience of the Australian population was determined through an online survey weighted to be representative of the Australian population. The research found that overall, around 2 million people experience severe or high financial stress/vulnerability. This means that more than 1 in 10 adults in Australia are likely to be facing financial issues.
The research also established that almost half of the population is vulnerable in regard to financial knowledge and behaviour, with close to 48% of people reporting that they only have a ‘basic understanding’ of financial products and services and more than 9% reporting that they have ‘no understanding’.
The researchers established that financial resilience is about access to four groups of resources:
- ‘Economic resources (savings, debt management, meeting costs of living, raising funds in an emergency, income level);
- Financial products and services (access to and demand for financial products and services);
- Financial knowledge and behaviour (knowledge and understanding of financial products and services and ability/willingness to apply that knowledge); and
- Social capital (family, friend, community, and government networks and supports).’
While it is not the role of career practitioners to provide these resources nor advise on them, they can be alert to the potential impact of a lack of these resources, refer clients to authoritative websites, and qualified professional specialists, thereby contributing to clients’ financial resilience. Given the uncertainty we’re currently facing from the economy, climate change, international politics, to name but three issues, contributing to people’s financial literacy is a critical role for career development professionals.
Skillsroad, an initiative of the Business chamber movement in Australia (NSW, Vic, WA, SA) includes a section on money. Young people can do a quiz to learn their money type, and watch YouTube videos on money matters.
The eSafety Commissioner’s eSafetywomen website provides advice on scams, online banking and online shopping.
Information on scams can be found at the beconnected and scamwatch websites, on cyber security at the staysmartonline website
The moneysmart website provides teacher resources.
Many libraries offer eSafety resources on their websites, such as Kalamunda in WA.
State and Territory governments have useful websites on business literacy essentials, as does the Australian government.
Resources on attitudes to money are available at a BBC website, a discussion on the ABC, and the UK’s Money Advice Service.
Dr Ann Villiers, career coach, writer and author
, is Australia’s only Mental Nutritionist
® specialising in mind and language practices that help people build flexible thinking, confident speaking and quality connections with people.
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