Financial Literacy among Young Indonesians and Australians

Posted on 5 August, 2020

Summarized and written by Dinda Amalia Ichsani – AIYA National’s Blog Editor

Translated by Adolf Richardo BS – AIYA National’s Content Translator

Indonesian version, click here

In 2015, The World Economic Forum stated that financial literacy is one of the foundation literacies that become a focus for Australian and Indonesian financial supervisory institutions.

‘Financial literacy’ can be defined as public knowledge and understanding of financial institutions, products, and services that influence their attitudes and behavior to improve the quality of financial decision making and management. Financial literacy is important for young people, especially Indonesians and Australians because good financial literacy will have a good impact on one’s financial condition. On a larger scale, it can even influence a country’s economy.

In general, Australia and Indonesia have used various ways to educate their young people in financial matters. Australia, for example, provides many sources of financial education that can be accessed for free. Meanwhile, Indonesia has the Financial Services Authority (OJK) that educates Indonesian about the importance of saving and investing in various types of financial products.

The results of a survey conducted by HILDA in 2019 showed that the financial literacy rate of Australians is 64%,  dominated by those aged 18-24 years old (34%). Meanwhile, the financial literacy rate in Indonesia is 38.03%, also dominated by those aged 18-25 years old (32.1%). The results of the survey indicate that the financial literacy rate of young Australians is higher than young Indonesians.

In order to increase financial literacy among its public, there are various strategies implemented by both two countries. Indonesia’s strategy is known as the “National Strategy on Indonesian Financial Literacy” (SNLKI). The main points in this strategy are: increasing public awareness and understanding of finance, encouraging the public to decide their financial goals and planning wisely, and providing financial access for everyone. Meanwhile, Australia calls its strategy “National Financial Capability Strategy” which focuses on education, information, and providing support for Australians by introducing good financial habits, educating people to make informed money decisions, and others.

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The development of information and communication technology has also helped to spread the trend of financial literacy in Indonesia and Australia. Various innovations in the field of Financial Technology (FinTech), particularly in the field of e-wallet app and mobile banking such as OVO, Go-Pay, DANA, Jenius, PayPal, and Alipay help introduce people to the concept of “cashless society”, making transaction simpler.

Unfortunately, those technological developments in the financial sector have not reached every part of society. There are many Indonesians who do not yet have access to e-wallet. Meanwhile, in Australia, cashless transactions have become very common.

Better knowledge about financial products will also increase investments, not only on widely known instruments such as gold and property, but also those in the capital market such as stocks, mutual funds, bonds, and others. The availability of various investment instruments will provide a chance for people to be able to achieve financial freedom in the future.

Being a part of the “sandwich generation” makes it difficult for many young Indonesians to achieve financial freedom, especially when they have to support both their parents and children. It will not be easy, but with proper financial planning, the bumpy road will be a little smoother. Some things can be done to prepare for the future, including start saving for your children’s tuition fees as soon as possible, control your debt, set financial goals and review them regularly, prepare for retirement by making investments, discuss financial planning with your parents and experts, and educate your children about the importance of money management.

Financial literacy is an important thing that needs to be understood by everyone, including young Australians and Indonesians so that they can make the right moves in financial management. Young people have great potential to become an economic driver, which may decide the fate of their countries.

Resources 

National Financial Capability Strategy 2018 

ASIC to set up expert group for youth financial literacy 

OJK Dorong Literasi dan Inklusi Keuangan Anak Muda 

Financial Literacy in Australia Insights from HILDA Data