Why does financial capability and financial wellbeing matter?

Financial wellbeing is important for people, communities and the wider economy. It impacts many areas of our everyday lives, and is intrinsically linked to individual overall physical, mental, environmental and social health.

Many factors influence individual behaviours, attitudes to money and financial decision making. These can include personal health, income, employment, family background and social support structures.

Financial capability

Is being able to talk about money, to make informed decisions about money and to feel financially secure.

Financial wellbeing

Is “when a person is able to meet expenses and has some money left over, is in control of their finances and feels financially secure, now and in the future” 1

1. Muir, K., Hamilton, M., Noone, J.H., Marjolin, A, Salignac, F., & Saunders, P. (2017).’ Exploring Financial Wellbeing in the Australian Context’. Centre for Social Impact & Social Policy Research Centre – University of New South Wales Sydney, for Financial Literacy Australia.

Financial education has long term transformative effects for the financial outcomes of people and communities.

People learn about money throughout their lives as they face different financial opportunities and challenges. They need to apply the financial knowledge they have built over time to meet these challenges in an increasingly complex world.

Studies have shown that teaching financial education in schools helps school aged children manage money more effectively in their daily lives. Financial education improves their financial knowledge and encourages healthy saving and spending habits.

As children grow into adults, they start making more complex financial and life decisions. It is particularly critical to ensure that young adults develop appropriate financial literacy because money habits formed in early adulthood tend to persist, and financial behaviour greatly impacts wellbeing.

To understand money, evaluate financial products and services, solve financial challenges, and prepare for retirement, people need the capacity to question, integrate information, manage risk, solve problems, experiment with financial experiences, and learn from different money outcomes.

National Strategy

The importance of financial capability is increasingly being acknowledged internationally with over 70 countries and economies having developed and implemented national strategies for financial literacy.

In Australia, the inaugural National Financial Literacy Strategy (the National Strategy) was launched in 2011, led by the ASIC on behalf of the Federal Government. The network of government, community, educators and business sectors aimed to support people to manage their money and recognise that when more Australians are in control of their financial lives, everyone benefits. 

The fourth National Strategy was launched by Federal Treasury in 2022, following a transfer of policy responsibility from ASIC.  

The National Financial Capability Evaluation and Monitoring Framework and National Financial Capability Survey were developed to support the Strategy to lift financial wellbeing outcomes, and to track and measure the impact of financial capability initiatives.

The National Strategy and supporting Evaluation and Monitoring Framework are not currently active.