Research shows 86% of Kiwis overconfident with their money

Source: 1News

As we make our way out of the Covid-19 pandemic, having dodged a recession to boot, there's nothing better than treating ourselves to a spot of retail therapy.

New research from the Financial Services Council of New Zealand has found around 86% of Kiwis are overconfident with their money - an 8% increase between 2020 and 2022.

But with overspending and a falling financial literacy rate, there's fears this overconfidence is misplaced.

In January 2022, just under 30% of respondents said they could last for a month or less without earning an income, and 40% said they would be strapped for cash in an emergency.

A further 45% said they would have to rely on friends or whānau or would be unsure how to manage if they became unemployed or had to take more than three months off work.

Meanwhile, the financial literacy rate is also falling, with just 44% reporting being financially literate - a decline of 6%.

Financial Services Council chief executive Richard Klipin told Seven Sharp we're "heading into a perfect storm".

"We're a bit worried that there's a little bit of hubris in those numbers, that people might feel like they're better off than they actually are," he said.

"We're kind of calling that out and asking New Zealanders to consider or think 'Am I actually in the right conditions to weather the current storm and the future storm', rather than the Covid pandemic which obviously, we're just at the tail end of."

Klipin said financial confidence begins when we're young, adding, "Like fitness and eating well and making good decisions, it's things that we build on".

He compared financial literacy to learning another language in a foreign country.

"What we're encouraging through this research is that people actually understand the language of money and take time to learn it."

Klipin said there are "so many financial traps" to look out for, with one of the major ones being debt.

"The 'I want it now' generation is so easy to fall into. The latest car, the latest television, the latest trip.

"What's really important is that people understand that taking stock of your finances is important, and prioritising things."

He said one trick to help Kiwis save more and spend less is normalising discussions around money and having "a plan of attack" for managing it now and in the future.