Dr Pushpa Wood sees locus control as a critical factor in understanding financial wellbeing. She explains it as “whether an individual believes/perceives that they have control over their destiny or whether it is someone else/external factors controlling their destiny,” she says.
“Each of these perceptions will then influence their approach to financial behaviour and management and will determine whether their behaviour moves towards self-management or handing over this responsibility to someone else.”
According to the survey, 19% of New Zealanders felt their financial situation was largely outside of their control. There was a greater concern for people with low financial wellbeing, with 40% of people struggling and 28% of people getting by feeling their financial situation was outside their control.
Elaine Kempson explains this in terms of informed financial decision-making – as the difference between ‘wanting’ and ‘needing’.
Informed decision-making is a key behavioural trait for financial wellbeing, gathering and weighing up information before making a decision. “It is the opposite of impulsivity in many ways,” says Kempson.
For fellow report Steering Committee Member, Dr Jo Gamble, Research Lead, Te Ara Ahunga Ora/Retirement Commission, people face all sorts of barriers to achieving financial wellbeing beyond lack of financial education and socio-economic factors that can involve both financial (e.g. gender or ethnic pay gaps) and non-financial inequity (like access to housing or mental/physical health facilities), which also need to be addressed.
“And then it gets more complicated when you consider the social norms regarding money that surround an individual (i.e. the role money plays in the family, or in a person’s peer group) as well as a person’s own personality,” she says. “So, finding ways to improve people’s financial wellbeing needs a holistic approach.”
Financial wellbeing research has come a long way from early focus on the premise that was that financial literacy equals knowledge rather than taking into account socio-economics, behaviours, attitudes and other contexts.
According to the modelling in the survey, financial knowledge added just 2.5% to financial wellbeing.
The research has evolved to reflect this. Kempson describes the latest ANZ surveys as an “enormous step forward” in how we understand the drivers of financial wellbeing.
“It has adapted to meet new challenges as we understand better what matters most to people’s financial lives.
Generations to come will be grateful for the wealth of information it provides.”
As understandings of financial wellbeing deepen, and research findings create stronger links to overall wellbeing, the importance of building financial wellbeing and interventions to improve financial wellbeing will only increase.
The big challenge ahead? For Dr Pushpa Wood it’s simple: “We need to really close the gap between ‘what people want to learn’ and ‘what they need to learn’.”
Emily Ross is a content producer and Director of Emily Ross Bespoke.
Dr Pushpa Wood, Fleur Howard, Jo Gamble and Celestyna Galicki were invited to contribute insights as members of ANZ’s external steering committees for this research. ANZ acknowledged their contribution to the research through a donation to their nominated charity.
The views and opinion expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.