WELLINGTON (XINHUA) – About 86 per cent of New Zealanders are overconfident with their money, according to New Zealand Financial Services Council’s (FSC’s) latest research report Financial resilience trends in New Zealand: Overconfidence and a perfect (savings) storm.
The report analysed data from previous Financial Resilience Index reports from March 2020 to January 2022 to identify trends in New Zealanders’ financial confidence and well-being throughout the pandemic and times of economic hardship.
In spite of encouraging financial confidence levels, other findings from the report suggest this confidence may now be misplaced, given the economic volatility, rising living costs and increasing interest rates witnessed in the months after the most recent data was released.
In January 2022, just under 30 per cent of respondents could last for a month or less without earning an income, 40 per cent didn’t know if they could raise NZD5,000 in a week in a time of emergency, and 45 per cent said they either would rely on friends or family or weren’t sure how they would manage if they were suddenly to be unemployed or unable to work for more than three months.
Half of the respondents said they had experienced financial issues that affected their overall well-being. What’s more, financial literacy is on the decline, with 44 per cent of survey respondents reporting being financially literate, a decline of six per cent.
FSC Chief Executive Officer Richard Klipin said, “The intention of this research was to look at some of the key trends and behaviours relating to financial confidence and well-being over the past three years to get a temperature check on how we are tracking.
“What the research tells us is there are some clear warning signs that there is a perfect storm brewing due to financial overconfidence, insufficient rainy day funds or retirement investments and economic uncertainties such as rising interest rates and inflation.”
The over-reliance on friends and families and the uncertainty on managing finances in times of crisis are worrying, as this can be a recipe for hardship, he said.
Factoring in how the economic environment has significantly changed since January this year, it is likely that the present picture is even more concerning.
It’s important that increased financial confidence is reflected in other indicators, such as financial literacy, financial preparedness, job security and well-being, he added.
