The mindset that can lead to greater financial wellbeing

29 May 2018

It's how you save and spend, not your earnings, that leads to financial strength, writes Rosemary Ryan.


Wellbeing is a word widely used these days to refer to a person’s health and state of mind but how about financial wellbeing?

Now becoming a commonplace term, financial wellbeing recognises that a person’s finances are linked to their overall wellbeing. It’s at the heart of a new study, Financial Wellbeing in Australia and New Zealand by ANZ Bank.

Surveying 3500 Australian adults about their financial situation, the results show that being in a healthy financial place is largely determined by a person’s behaviour and attitudes towards money, not just their financial knowledge or income.

In particular, it highlights how moving from a ‘spending’ to a ‘saving and investing’ mentality can boost financial wellbeing.

The landmark study was conducted in 2017, the sixth in a series from ANZ exploring financial literacy, attitudes and behaviours since 2002. It encompasses a broad view of financial wellbeing, largely based on developments by global financial wellbeing expert Professor Elaine Kempson from the University of Bristol’s Personal Research Centre.

Kempson defines financial wellbeing as “the extent to which someone is able to meet all their current commitments and needs comfortably, and has the financial resilience to maintain this in the future”.

What makes up financial wellbeing

The survey measured three components of participants’ overall financial wellbeing:

  • their ability to meet financial commitments
  • how comfortable they are with their current and future financial situation
  • their ability to cope with a significant unexpected expense or fall in income.

And there were five ‘domains’ considered to most influence financial wellbeing:

  • financial behaviour
  • psychological factors
  • financial knowledge and experience
  • socio-demographic status and economic characteristics.

The end result of the survey was to classify participants into four categories, in order of financial wellbeing, which are:

  • No worries (24 per cent)
  • Doing OK (40 per cent)
  • Getting by (23 per cent)
  • Struggling (13 per cent).



As the name suggests, the No worries group had no real financial concerns. Representing about 4.5 million Australians, they scored 90 out of 100, performing strongly in behaviours that contribute positively to financial wellbeing including high levels of confidence in managing money, and substantial amounts in savings and investments (median value of $108,000) and superannuation (median value of $182,000 amongst those holding super).

They were also more likely to own their own home outright (57 per cent compared to 29 per cent of the total) and the majority (87 per cent) have less than $10,000 in consumer debt (versus 74 per cent of the total).

Doing OK was the largest group, representing forty per cent of all Australians (around 7.4 million people). They had reasonable financial wellbeing levels, linked to secure employment and steady household income with an average score of 64. Nearly all of them could meet their current financial commitments.

They also have higher levels of resilience (only 7 per cent didn’t have any savings, compared to 37 per cent of those who were getting by) and they were more likely than average to depend on wages and salary as their main source of household income (62 per cent). They also had more super (40 per cent had $100,000 or more versus 26 per cent and 24 per cent of those in the two lower groups who were members of a super fund).

The score for Australians overall was 59 out of 100, putting us on a par with New Zealand but below Norway, where the average score is 77, indicating that Norwegians have an excellent standard of financial wellbeing.

Behaviour, not knowledge, in the driver’s seat

A key finding of the study was that behaviour accounted for 45 per cent of overall financial wellbeing, with two factors in particular emerging as most critical – actively saving and not borrowing for everyday expenses.

These two behaviours each had a “significant and direct” effect on financial wellbeing contributing 19 per cent and 16 per cent respectively to explaining differences in people’s score.

In contrast, having detailed knowledge about and experience with financial products and services had only limited direct influence on financial wellbeing.

The benefits of saving and not borrowing for everyday expenses apply to high and low-income earners alike. Two people, with essentially the same income and socio-economic situation, achieved very different financial wellbeing scores – 49 points apart – based on how highly they scored on these two behaviours.

The survey showed in a broad range of demographic/income segments how practicing these two behaviours could increase financial wellbeing by more than 26 per cent.

“I encourage Australians to actively save and resist borrowing for daily expenses – these behaviours are key to financial wellbeing,” said Kempson.

Why earning the big bucks doesn’t matter so much

The study found the relationship between income and financial wellbeing was a complex one, with a bigger pay packet not necessarily guaranteeing more bliss – there was very little change in financial wellbeing scores as income increased from $50,000 to $150,000.

“These findings draw attention to the fact that financial wellbeing involves a ‘state of mind’ component,” the report says.

Here’s what you can look at to start adopting the right mindset:

  • Set a budget, so you know exactly where your money is going.
  • Have an emergency fund, so you can cover unexpected expenses.
  • Aim to save a certain amount each pay check, for example, 10 per cent.
  • Ramp up your retirement savings, so you can continue your lifestyle in retirement.

Ready to make a contribution?

To make a concessional (before-tax) contribution, speak to your employer about salary-sacrifice.

For non-concessional (after-tax) contributions or personal contributions (on which you intend to claim a tax deduction - you must notify the fund), ANZ Smart Choice Super customers can make a contribution via BPAY.

Biller Code – 169060

Reference Code – member number (this is a combination of your ANZ Smart Choice Super BSB and account number.)