Context

This 20-year longitudinal study is designed to contribute to a better understanding of issues related to the level of financial literacy in New Zealand. In particular, the study explores New Zealanders’ experience of financial education and its contribution to their financial literacy. While the study builds on previous studies in New Zealand and around the world, its approach differs by taking a cohort of young New Zealanders and following them over a 20-year period at five-yearly intervals. This longitudinal element is unique in the New Zealand context, and will enable tracking of pathways to improved financial literacy over time.

The study

The study comprises a cohort of 300 New Zealanders aged 18-22 years. A baseline survey of participants’ financial literacy and experience of financial education has been undertaken. This stage of the study collected data in two ways: an online questionnaire and face-to-face interviews. Participants were drawn from the New Zealand electoral rolls on a national basis but with some regional clustering for practical reasons. The locations were: Auckland, New Plymouth, Palmerston North, Wellington, Nelson, and Christchurch.

Key findings

This is an interim report on the baseline stage of the study. Key findings, drawn from an online questionnaire and face-to-face interviews are:

• There is a relatively low level of financial knowledge compared to studies in other countries.
• Young New Zealanders lack opportunities for formal financial education to assist their development of sound personal financial management skills.
• Based on responses to an online questionnaire and interviews, it is evident that young New Zealanders are exposed to informal financial education, such as the promotions undertaken by the Commission for Financial Literacy and Retirement Income in relation to credit card debt, and that this is having an impact although individuals may not recognise the influence.
• Parents remain the key source of informal financial education for young New Zealanders, although in some cases the parents’ own personal financial knowledge may be limited, restricting their ability to provide the knowledge required by their children.
• Young New Zealanders often know the key elements of good financial management, such as the need to save, but may not be putting it into practice.
• Young New Zealanders are scared of debt, particularly in the form of credit cards.

Points to consider

• The authors point out that there is an urban and female bias to the sample and that no attempt has been made to ensure the sample is demographically representative in terms of gender, age or ethnicity. There is likely to also be a self-selection bias in the sample, because those more interested in the study subject and those with a higher level of self-motivation are more likely to have agreed to participate in the study. This bias is stronger due to the low response rate, but the effect of the bias is unknown.
• Looking forward, a cohort of 300 is a small sample size for a long-term longitudinal study.

• This is an interim report – full results were due to be published in 2013, to include additional results such as retirement planning, wellbeing and financial situation.

Full report

How young New Zealanders learn about personal finance - full report