In a surprise finding, Kiwis are proving themselves to be better financial planners than their Asia Pacific neighbours and are saving more amid global economic turmoil, according to MasterCard research.
New Zealand and Taiwan tied for first place for overall financial literacy across the Asia/Pacific region with a score of 73 index points each. Australia, Hong Kong and Singapore followed closely behind at 71 index points each. New Zealand’s score of 73 also sits well above the index average of 67 across the region.
“New Zealanders have always been responsible finance managers and quite conservative users of credit. But New Zealanders are increasingly aware of their budgets, in turn making them more acutely aware of their spending,” said Albert Naffah, country manager, MasterCard New Zealand.
New Zealanders topped the region when asked about overall basic money management skills (77% of respondents), such as understanding day-to-day budgeting (93%), keeping up with bills (76%), keeping track of spending (81%) and setting aside funds for big purchases (61%).
“Kiwis have demonstrated for a long time that they are very smart and savvy users of credit cards. For a number of years now, the trend across New Zealand is that repayments are exceeding spend – that is, Kiwis repay more than they spend in any given year,” said Mr. Naffah.
“More New Zealanders are tightening their belts and repositioning their finances towards more regular savings and emergency reserves, with the percentage of Kiwis recognising the need to save regularly rising to 93%, up from 90% in 2010.
“Kiwis are more acutely aware of the need to put savings aside for a rainy day. Disasters, like the devastating earthquakes in Canterbury, have helped prompt New Zealanders to put more into savings to meet emergency needs (80%) and place a greater emphasis on taking out insurance to be prepared for the unexpected (66%).
“Conversely, only 28% of respondents have calculated the amount of retirement funds they will need at retirement age, making New Zealand the lowest ranked market in the region and indicating that there is still much work to be done in this space.
“New Zealanders also demonstrated a high level of knowledge about financial products, services, and concepts (76%), and ability to plan for long-term financial needs (76%). This can be attributed largely to KiwiSaver and the public debate around the retirement age. KiwiSaver has also shifted opinion towards viewing starting early with financial planning favourably (89%),” said Mr. Naffah.
Across the region, respondents over 30 years of age appeared to score higher in financial literacy compared to their counterparts under the age of 30. This was especially clear in the New Zealand market, where the divide was 76% (over 30 years) vs. 65% (under 30 years).
The Index is based on a survey of consumers from 25 markets across Asia Pacific, Middle Eastern and African countries and comprises questions covering three major components:
- Basic Money Management (50% weight): To determine the level of basic money management skills in terms of budgeting, savings, and responsibility of credit usage.
- Financial Planning (30% weight): To assess level of knowledge about financial products, services, and concepts, and ability to plan for long-term financial needs.
- Investment (20% weight): To determine basic understanding of the various risks associated with investment, different investment products and skills required.
A Financial Literacy Index Score for each market was calculated out of the weighted sum of the three components.
Regional Aggregates are calculated via the average of the individual country components before applying the weights described above.
Countries surveyed are Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.