SOCIAL JUSTICE
SNAPSHOT FINANCIAL LITERACY
By Dr Andy Marks andy.marks@vinnies.org.au
7 June 2009
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Agencies work together to combat financial stress and predatory lenders
“ t’s like a hotel forcing drinks on somebody and then asking them to drink responsibly.” At first glance this confronting statement may seem out of place at a workshop on the impact of the global financial crisis. However, on closer inspection it is clear that this kind of straight talk is exactly what is needed at a time like this. The responsible drinking analogy, raised by Dr Steve Keane, Associate Professor in economics from the University of Western Sydney was a very effective illustration of the double standards that abound in Australia’s financial regulation system. Dr Keane was referring to the lack of protection and recourse available to disadvantaged people targeted by unscrupulous or “predatory” lenders, offering “interest free repayments”, “no credit checks”, and a range of other “too good to be true” incentives.
“It’s like a hotel forcing drinks on somebody and then asking them to drink responsibly.” The impact of predatory lending was just one of the many issues discussed at the recent Policy Workshop on Financial Stress. Chaired by the Wesley Mission, the workshop drew participants from the St Vincent de Paul Society, the Salvation Army, Mission Australia, the Smith Family, Anglicare, the state government, universities, and the business community. The workshop was a great example of diverse agencies and people working together for a common aim, a common good; specifically, to ameliorate the impact of the current financial crisis on the most disadvantaged members of the community.
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The participants discussed a range of recent research findings concerning the social, psychological and emotional implications of financial stress. Correlations were drawn between families spending more than they earn and resulting declines in the quality of family relationships. Studies confirming the negative impact of financial stress on physical and mental health were also discussed. Facilitated by the Nine Network’s Finance Editor, Ross Greenwood, the workshop was more than just a talkfest. It was also an occasion to put forward solutions. Equally, it wasn’t just a forum for researchers. The voices of practitioners waging war on financial stress on the frontline were also heard. One financial counsellor, Susan, who works at the grassroots level with countless families in financial stress called on banks to be more flexible. Many people she said, were on the brink of homelessness, simply because the bank refused negotiate reasonably with them about unforseen changes in their circumstances such as ill health or unemployment. The issue of inflexibility in the banking sector prompted calls for banks to wave fees for vulnerable groups such as pensioners, students, carers, the disabled and the unemployed. A senior representative from the Bankers Association present at the workshop agreed that banks could do more, however she also drew attention to the many measures already in place for disadvantaged groups, conceding that these concessions could be better publicised. While it was agreed issues like mortgage stress are on the increase, there was consensus on the fact that renters were most at risk of financial stress. With unprecedented demand for rental properties and a record short-fall in supply, rents throughout NSW have reached levels approximating mortgage repayments.
“It is not just an economic problem but one that has complex social implications for individuals and the wider community.” The fundamental question of how we define financial stress became a central issue for workshop participants. Rather than looking solely to economic indicators, it was agreed that if a person’s financial situation prevented them from engaging in the community then they were in financial stress. This definition is a critical progression because it captures the full experience of financial stress, illustrating how it is not just an economic problem but one that has complex social implications for individuals and the wider community.
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Financial counselling and financial literacy programs were cited as being the most widely adopted strategies currently in place to prevent and alleviate financial stress. While it was agreed these programs can work, it was felt their impact is low because they do not effectively appeal to people experiencing financial stress. Perceived problems in the rate of uptake and appeal of financial literacy programs led to a discussion on the behavioural aspects of money management. The St Vincent de Paul Society’s contribution to this aspect of the forum was well received. The Society observed how research and practice confrimed people do not typically plan their lives around financial matters. This assertion is backed by statistics confirming that less than 5 per cent of people in financial stress seek help.
Given our tendency to plan our futures around major life ‘events’, shouldn’t our financial planning also mirror this structure? Rather than planning for financial eventualities, behavioural studies prove people prefer to plan around what can be called life ‘events’; for example, marriage, the birth of a child, the commencement of education, the loss of a job, inheritance, ill health, death and other issues. Given our tendency to plan our futures around major life ‘events’, shouldn’t our financial planning also mirror this structure? ‘Event’ orientated financial planning has been adopted recently in the United States and proven to be remarkably successful as they effectively utilise everyday language and timescales. New approaches to financial literacy and a range of additional ways to ameliorate financial stress flowed through the workshop. One participant remarked that the current global financial crisis meant that agencies like the St Vincent de Paul Society, Wesley Mission, and others needed to work more with one another to find the best solutions for those we serve.
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As the workshop drew to a close, one panelist commented that the financial stress workshop was like a ‘war cabinet’ where various parties whose paths sometimes diverged, worked together to stare down a common threat.
“If a person’s financial situation prevents them from engaging in the community then they are in financial stress.” While it may not have been the first united campaign designed to reduce the impact of the global financial crisis on disadvantaged Australians, the Financial Stress Workshop was certainly not the last salvo.
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