When you are in your mid-20s you start to wish that they taught you in high school how to cook proper food and do your taxes. Home economics obviously wasn’t taught at my school and tax really has nothing to do with Maths. Surprise, surprise that bit of an Arts degree I did alongside my Law degree didn’t help that much with my adulting skills either. Who knew French literature would be of so little practical use?
What many of us may not realise is that financial literacy is a problem for a huge percentage of women in Australia. A recent article I read by SBS “the Feed” and written by Ella O’Shea discusses this issue of financial literacy and the findings from a survey undertaken by the Household, Income and Labour Dynamics in Australia (HILDA). That survey found that only 35% of women were able to answer the five questions relating to financial literacy correctly, compared to 50% of men.
The questions were:
- Suppose you put $100 into a no-fee savings account with a guaranteed interest rate of 2% per year. You don’t make any further payments into this account and you don’t withdraw any money. How much would be in the account at the end of the first year, once the interest payment is made?
- Imagine now that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, would you be able to buy more than today, exactly the same as today, or less than today with the money in this account?
- Do you think that the following statement is true or false? “Buying shares in a single company usually provides a safer return than buying shares in a number of different companies.” (True or false?)
- Again, please tell me whether you think the following statement is true or false: “An investment with a high return is likely to be high risk.” (True or false?)
- Suppose that by the year 2020 your income has doubled, but the prices of all of the things you buy have also doubled. In 2020, will you be able to buy more than today, exactly the same as today, or less than today with your income?
How is this related to family law? If 65% of women are struggling with financial literacy, then they are probably relying on someone else, such as a partner, to help them with their day to day financial tasks such as choosing a bank or a bank account and investing income smartly.
That’s all well and good while you and your partner are still together but what happens when you separate? It’s not surprising then that many women get a shock after separation when they are faced with having to make hard financial decisions. In circumstances where many women may continue to be primary carers for their children, it’s even more important that they make the most of every dollar they receive.
By the way the answers are 1) $102 2) Less 3) False 4) True 5) Exactly the same.
At FGD we are family lawyers, and we can give you family law advice, but we also recognise that you need advice and assistance from other professionals along the way. If you are going through a separation, or thinking about separating from your partner, come and see us and we will make sure you have assistance for all aspects of your separation.