Money, Money, Money: Why having strong financial literacy matters more than ever for Kiwis

I think I speak for most Kiwis when I say money, money, money is most definitely not funny when you’re not living in the rich man’s world. It’s the complete opposite. It’s chaotic, and it’s stressful. Never in my life have I ever been so keen to keep my wallet shut and my belt tight, and that’s saying something because I’m a shopper. And as our nation continues to grapple with inflation, rising living costs, and economic uncertainty, it’s no surprise that we Kiwis are trying to save more and spend less. And it’s even less surprising that financial stress levels are as high as interest rates. The silver lining? More and more Kiwis are showing an interest in developing their financial literacy.

NZ’s current economic climate: shaky at best

New Zealand’s economic landscape has shifted dramatically over the past few years. In 2022 inflation was running as high as 7%, which has (thankfully) dropped and is now sitting at 2.2% as of September 2024. But most of us still feel the pinch across all aspects of daily life, from increasing cost of groceries, fuel, bills—and don’t even get me started on the housing market.

What used to be a cornerstone of wealth building for Kiwis has experienced significant volatility. The rise in interest rates has particularly impacted mortgage holders, with many facing hundreds of dollars in additional monthly payments. And if buying a house seemed difficult before, it might as well be Mission Impossible now. Unfortunately, things aren’t much better for renters, with increased landlord costs driving up rents and making it harder to save for a house deposit.

Businesses aren’t immune either, particularly those that are small to medium-sized. Aggressive interest rate hikes aimed at controlling inflation have made loans more expensive and sometimes even harder to get. As a result, many companies have postponed expansion plans, reduced staff hours, or implemented hiring freezes and redundancies. And what is the effect?

Kiwis are spending less

Have you ever been shopping and spotted a jacket that you instantly fell in love with and had to try on but immediately put it back on the rack the second you caught a glimpse of the price tag? That was me at PAK‘nSAVE last week. While my partner picked out the things that were actually on our grocery list, I abandoned him for the delicious pile of mangoes that were calling my name, only to quickly retreat when I realised they were going for more than seven dollars each.

Groceries are an essential purchase, but I was willing to forgo my beloved mangoes so I could save money for other expenses. And I’m not the only one changing my spending habits. These days, it’s becoming more common for Kiwis to cut back on discretionary spending. Some of us are even cutting back on essential purchases. For example, opting to take public transport instead of paying for fuel or delaying a dentist appointment until our next paycheck. Or worse again, relying on credit cards or loans to make ends meet.

But even when we cut back on spending, this strategy often does little to quell our money worries.

Financial stress is high and strong

Inflation is high. Costs are high. Job insecurity is high. And money is low. And it’s got us stressed as hell, some of us more than others.

A combined research study between TRA and Te Ara Ahunga Ora Retirement Commission revealed that 56% of Kiwis would describe their financial situation as ‘uncomfortable.’ But none more than Māori and Pasifika communities, women, younger generations, and renters.

Māori and Pacific communities continue to face disproportionate financial challenges, with research showing lower average savings rates and higher levels of financial hardship. Cultural obligations, historical wealth disparities, and systemic barriers contribute to these challenges.

For young New Zealanders, specifically those aged between 18 and 34, financial discomfort has grown by nearly 10%. Not to mention, more of us are increasingly postponing major life decisions because of financial constraints. And let’s not forget that student loan debts are adding an extra layer of pressure.

Women in New Zealand face their own set of financial challenges. The gender pay gap persists at 8.6%, and women are more likely to take career breaks for caregiving responsibilities, impacting their long-term financial security. Single mothers, in particular, report some of the highest levels of financial stress.

Overall, more people are worried about their finances pay to pay, and this is starting to impact Kiwis’ health, well-being, and relationships. Research from Partners Life revealed that 62% of Kiwis believe that finances are negatively impacting their relationships with friends and family, and 48% of Kiwis reported having lost sleep because of financial stress.

Financial literacy—what every Kiwi needs right now

Historically, Kiwis haven’t had the strongest financial literacy levels. In fact, while 75% of Kiwis recognise the importance of financial literacy 84% have never received professional training in finance. It’s shocking news, really, given we don’t even touch on basic financial concepts in our schooling. Still, hey, at least I know that mitochondria is the powerhouse of the cell…

Financial literacy is about developing the skills, knowledge, and confidence to make informed financial decisions. It’s about understanding concepts like inflation, compound interest, and investment risk—not just knowing how to budget. When we feel confident and informed about our financial decisions, we’re less likely to fall into debt and have reduced savings and more likely to have strong financial resilience.

Thankfully, there’s been a growing appetite for financial knowledge among Kiwis, and it’s brought about some interesting developments. For example, financial education is becoming more accessible than ever, thanks to digital banking and investment platforms. While traditional banks like ASB and ANZ offer comprehensive online learning resources, newer fintech (financial technology) players such as Sharesies and Hatch have democratised investment knowledge through educational content and user-friendly interfaces.

Social media and online communities have followed in their footsteps and emerged as popular sources of financial information, with platforms like TikTok and Instagram becoming unexpected hubs for financial advice through #FinTok and #MoneyTok. Local financial influencers and content creators are amassing significant followings by breaking down complex financial concepts into digestible pieces. But, like always, information from social media should sometimes be taken with a grain of salt. The unregulated nature of social media advice means that misinformation can spread quickly, and what works for one person’s financial situation may not suit you.

The key is finding reliable, professional sources of financial guidance. While online communities can provide valuable insights and motivation, they should complement rather than replace professional financial advice. Organisations like the Financial Markets Authority (FMA) recommend a balanced approach: utilising digital resources for general education while seeking qualified financial advisors for personalised guidance, especially for major financial decisions, and other financial experts like accountants.

How you can build your financial literacy

As someone in their twenties who’s recently moved out of home and just got her first full-time job, I’ve had to put my big girl pants on and teach myself the basics of managing money. Especially since I receive paychecks monthly. My point is, I’ve been going through my own financial education journey lately, so I’ve got some tips on where to start.

New Zealand offers numerous resources for those looking to improve their financial literacy. The Commission for Financial Capability provides free online tools and resources, while many banks offer financial education programmes. Community organisations and libraries frequently host workshops on budgeting and money management. You’ll even often find those of us at Gilligan Sheppard uploading articles about recent movements in the financial sector and tidbits of information you should know about.

Here are some general steps you can take to start building your financial literacy:

• Learn how to create a budget and track income and expenses
• Research and understand debt
• Understand banking and the different options available to you
• Learn about compound interest
• Understand superannuation and review your KiwiSaver options
• Learn about different types of investments
• Seek professional advice and assistance for complex financial decisions

When to seek professional advice

When it comes to big financial decisions and complex situations, it’s sometimes in our nature to hold back from seeking help, especially when money is involved. Even when worried about debt levels, fewer than 20% of Kiwis will seek out professional advice. But more often than not, it’s best to listen to your gut when you know you’re out of your depth. Instead, enlist the help of those who know what they’re doing and care about helping you make the right decisions.

At Gilligan Sheppard, our team of experienced accountants and bookkeepers are more than financially literate. We provide practical, personalised guidance to help you navigate your financial situation. Whether you’re a business owner looking to organise your books with software like Xero or an individual seeking assistance with IRD debt, we’re here to help.

We offer a range of services tailored to your specific needs, from tax returns to complex business advisory services. Our approach focuses on education and empowerment, ensuring you understand not just what financial decisions to make but why they’re important for your future.

Don’t let financial uncertainty hold you back. Contact us here to start working towards building a stronger and better financial future.